Against the backdrop of AI transitioning from model training to large-scale inference and agentic applications, cybersecurity is no longer an accessory to traditional IT architecture but has evolved into an indispensable core control layer for the deployment of AI. Security giants such as CrowdStrike (CRWD) and Palo Alto Networks (PANW), leveraging their deep accumulations in cloud security, identity management, and platform integration, are emerging as definitive beneficiaries in the industry’s “closed-source versus open-source” debate.
Wells Fargo, a major Wall Street financial institution, recently released a research report indicating that cybersecurity leaders CrowdStrike and Palo Alto Networks, as they approach their earnings announcements, are benefiting from the rapid expansion of the AI inference market and are experiencing strong momentum in orders for cybersecurity software products.
Addressing the industry debate over the ultimate trajectory of “closed-source AI large models versus open-source models,” Wells Fargo analysts believe that regardless of which model ultimately prevails or if both develop in parallel, the outcome represents a significant positive for CrowdStrike and Palo Alto Networks. In the AI era, cybersecurity demonstrates the strongest “cross-scenario beneficiary” logic: open-source models increase the number of deployments, closed-source models enhance the value of centralized cloud operations, hybrid architectures add to system complexity, and AI agents greatly expand permissions and attack surfaces. Consequently, cybersecurity software platforms have been defined by some Wall Street strategists as yet another indispensable structural AI investment theme, following GPUs, optical interconnects, power, and cloud infrastructure, positioning them as a critical control layer that is unavoidable in the large-scale implementation of AI.
In their report based on a survey of cybersecurity resellers, Wells Fargo analysts Richard Poland and Michael Turrin stated that security demand remains strong, with partners reporting a net 31% outperformance against plans and weighted average year-over-year growth accelerating to 16% from 13% in the previous quarter, with over half of respondents expecting growth to pick up in the second half of the year. Growth drivers, ranked by importance, are artificial intelligence, identity security, endpoint security, and others. Of particular note, respondents estimated that approximately 40% of AI-related security spending comes from new funding pools outside traditional cybersecurity budgets, including dedicated AI budgets and other IT budgets, indicating that AI is expanding the total addressable market for cybersecurity rather than merely reallocating within existing budgets.
Capital markets have already priced in the incremental value of cybersecurity, with stocks of companies like CrowdStrike and Palo Alto posting significant gains year-to-date. The sector’s trading logic has shifted from concerns about AI displacing traditional software to betting that the AI inference era will substantially expand security budgets. However, the emergence of a super-cycle in demand does not imply that any price represents an investment opportunity. Analysts point out that CrowdStrike, despite strong demand, previously experienced a single-day decline when growth fell short of extremely elevated expectations, underscoring that cybersecurity leaders have transitioned from a valuation discount phase to a high-expectations stage where they must continuously demonstrate that AI technology penetration can effectively translate into revenue, platform integration, and cash flow growth.
