Amid perceived artificial intelligence (AI) threats, cybersecurity stocks are enduring quite a rough patch. However, there are alternative viewpoints. If validated, those perspectives could signal opportunity with cybersecurity stocks and ETFs such as the WisdomTree Cybersecurity Fund (WCBR).
Indeed, some market observers believe select cybersecurity equities, including some WCBR holdings, are now offering compelling value. That follows a drubbing induced by Anthropic’s Claude AI tool. Plus, some experts see cybersecurity stocks as potential beneficiaries of U.S. conflict with Iran.
WCBR, which turned five years old in January, tracks the WisdomTree Team8 Cybersecurity Index. The ETF holds 24 stocks, some of which are commanding attention as value plays and potential rebound candidates.
There May Be Value in WCBR
In the go-go days of the cybersecurity trade, these stocks were rarely undervalued. If anything, they were frequently richly valued. However, following the recent Claude “catastrophe,” some cybersecurity names look appealing on valuation.
Morningstar’s Dave Sekera mentioned CrowdStrike (CRWD) and Okta (OKTA) among the cybersecurity stocks that may be offering valuation opportunities. That duo combines for nearly 10% of the WCBR portfolio.
“I think that these are specifically getting caught up with the downturn we’re seeing in the software stocks, anything that’s being sold, software as a service,” he noted. “And a lot of these stocks, I think people are very concerned about whether or not there’s actually existential risk for these companies more than they’re concerned about any one individual quarter or even, like, this year’s earnings.”
As Sekera pointed out, CrowdStrike and Okta should communicate to investors that AI isn’t the end of the cybersecurity industry. That’s true for other WCBR holdings, too.
Increased education and communication by WCBR components is obviously limited to some extent from a regulatory perspective. However, it should point out that AI is likely additive to the cybersecurity thesis, not a full replacement for it.
“I mean, artificial intelligence only can use what knowledge is already out there. [It] doesn’t develop and identify like new systems,” concluded Sekera. “It can’t really protect against vulnerabilities that haven’t already been discovered and out there, whereas the cybersecurity companies can get ahead of that. So again, I think it’s really trying to educate the market more on how they think that that’s going to play out over the next three to five years, than, really, the market caring about what earnings is going to be this quarter or next.”
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