CNBC’s Jim Cramer said Monday that investors need not fear from cybersecurity stocks, which are already on the rise. Cybersecurity stocks struggled earlier this year in the wake of a broader software selloff as investors worried that AI would disrupt traditional software business models and erode pricing power. But the group is making noise again as Wall Street increasingly sees AI as a reason why companies need to spend more, not less, on protecting against digital threats. Shares of CrowdStrike and Palo Alto have risen 84% and 106%, respectively, since the beginning of the year. Cramer’s Charitable Trust owns stock in both CrowdStrike and Palo Alto. Kramer doesn’t think these efforts are over. “This is a market unlike any other. … The problem is that these companies’ earnings are exploding, so we have to increase their P/E ratio,” he said on “Squawk on the Street.” He pointed to a bullish call from TD Cowen, which raised its price target on CrowdStrike from $175 to $235 and on Palo Alto from $360 to $400, while maintaining buy ratings on both stocks. The company said both companies are benefiting from strong cybersecurity demand driven by AI. Kramer pushed back against the idea that AI developers themselves could provide sufficient protection. Rather, he argued, the rise in cyber-attacks has increased the need for dedicated cybersecurity providers. “I think if they felt there was no chance of hacking, they would sell it,” he said. “Yet, if you look at hacks, there are countless of them.” He said the expanding threat landscape, coupled with more companies moving their data and computing operations to cloud-based systems, is giving cybersecurity companies a long runway for growth. He specifically highlighted CrowdStrike. “If you go to the cloud, you need to be protected by CrowdStrike,” Cramer says. “They’re cloud-native and have only 15% penetration into the business.” This opportunity is why Cramer said investors shouldn’t think the stock’s best days are behind it. “I think the answer is that CrowdStrike will get even higher,” he says.
