The case for owning cybersecurity stocks in the age of AI just got stronger

The case for owning cybersecurity stocks in the age of artificial intelligence just got stronger after new evidence showed that hackers are using AI to accelerate more sophisticated attacks. In a report this week, the Google Threat Intelligence Group (GTIG) found that, for the first time, a threat actor used an AI-developed zero-day exploit designed to circumvent two-factor authentication. Zero-day is a cyber industry term referring to a security flaw that goes undiscovered by those who can fix it, making the vulnerability an even more threatening risk. Google researchers said this is an example of adversaries increasingly leveraging AI to automate vulnerabilities, phishing campaigns, and malware development. This heightened threat environment is bullish for AI-native cybersecurity companies like Club holdings CrowdStrike and Palo Alto Networks because it reinforces the idea that cyber spending is mission-critical as companies need to partner with platform providers capable of detecting and responding to threats in real time. It strengthens our investment case for CrowdStrike, which has positioned its Falcon platform and Charlotte AI offerings around autonomous threat detection and response. Palo Alto has also emphasized its AI-driven platform strategy and intelligence capabilities. The Club has long owned buy-equivalent, 1-rated CrowdStrike, which we like the best in the group. We have Palo Alto as a 3 rating , meaning we're looking to sell it into strength. Jim Cramer decided we only need one cybersecurity name in the portfolio and wants to make room for other opportunities in other sectors. Both cybersecurity companies were higher Tuesday, after CrowdStrike and Palo Alto returned 44% and 38%, respectively, over the past month. That's a major positive reversal from the pressure they were under earlier this year in the broader sell-off in software stocks amid worries of AI disruption. We never felt that was right. CRWD PANW YTD mountain CrowdStrike and Palo Alto Networks YTD CrowdStrike is just over 2% away from its closing record high of $557.53 back on Nov. 10, 2025. Palo Alto has seen a similar chart pattern. It is less than 3.5% off its Oct. 28, 2025 record close of $221.38. Both stocks are up roughly 16% year-to-date. The S & P 500 is up about 7.5% year to date, down slightly Tuesday from the prior session's record closing high. The pair is also bucking the negative performance of the iShares Expanded Tech-Software Sector ETF, which is down nearly 16% in 2026. Jim has long argued that the IGV, as it is also called, should not be a comparison benchmark for cyber companies. CrowdStrike and Palo Alto together have a roughly 11.5% weighting, which is a drop in the bucket versus all the software names. Google's threat report lands at a critical moment for the cybersecurity industry as companies race to secure increasingly complex AI environments. Investors have spent the last year debating whether AI could eventually reduce cyber costs by automating defensive solutions. Instead, Google's findings suggest the opposite may be happening – AI is lowering the barrier to entry for sophisticated attacks, while the advent of companies adding AI agents exponentially increases points of vulnerability. That dynamic, Barclays believes, could force companies to spend even more aggressively on cyber security defense systems, like industry leaders CrowdStrike and Palo Alto Networks. Hackers are increasingly using large language models to find and exploit vulnerabilities, a trend that "will only accelerate with more advanced AI models," Barclays wrote in a Monday research note to investors. "This could only drive more spending on cybersecurity," analysts added, because the increase in AI-enabled attacks could drive demand for security tools. They predict security vendors could start to see "real revenue opportunity" this year, stemming from safeguarding against AI-driven attacks. Anthropic's Claude Mythos — the AI startup's general-purpose cybersecurity-focused AI model – is also putting this conversation at the forefront . Last month, Anthropic launched Project Glasswing, a defensive cybersecurity initiative tied to its unreleased Claude Mythos model, alongside CrowdStrike and Palo Alto, as well as other Club names Amazon , Apple , Broadcom , Alphabet , Microsoft , and Nvidia . (Also part of the project are Cisco Systems , JPMorganChase , and the Linux Foundation.) The initiative is designed to help companies use Mythos to identify vulnerabilities and strengthen defenses after Anthropic said the model has already found "thousands of high-severity vulnerabilities." CrowdStrike CEO George Kurtz made a similar case on "Mad Money" last month after Mythos findings were unveiled. "You can't have AI without security," Kurtz told Jim. "We're the experts at it." The CEO added that one of the things holding back AI adoption is AI securitization. That, according to Kurtz, is why CrowdStrike was chosen to be part of the solution in the Mythos partnership. (Jim Cramer's Charitable Trust is long CRWD, PANW. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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