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Artificial intelligence will likely be a long-term tailwind for cybersecurity stocks, says Hamza Fodderwala – a Morgan Stanley analyst.

Fodderwala is bullish on Microsoft stock

Fodderwala is convinced that A.I. will unlock an opportunity worth more than $30 billion in cybersecurity.

Microsoft Corp (Nasdaq: MSFT), he said in a recent note to clients, was likely to be one of the primary beneficiaries of the said tailwind.

With generative AI being used to create and mutate malware faster than ever before, we think this significantly increases the need for overburdened security organisations to invest in automation.

In its latest reported quarter, the tech behemoth attributed a 13% annualized growth in “Search” to the integration of ChatGPT into Bing. Microsoft stock is currently up 40% versus the start of the year.

Fodderwala likes Palo Alto Networks as well

Fodderwala expects artificial intelligence to benefit cybersecurity companies also because labor shortage and an increase in threats speak to the need for automation.

To that end, another name that pops out to him in this space is Palo Alto Networks Inc (Nasdaq: PANW) which has already nearly doubled this year. According to the Morgan Stanley analyst:

 

While still early days and likely a net tailwind for the group, we think the most immediate beneficiaries are those with large, unique data sets across multiple threat vectors.

He has a $302 price target on PANW that suggests another 20% upside from here. Two more cybersecurity stocks that Fodderwala is convinced will benefit from A.I. include Fortinet and CrowdStrike.

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