Wall Street’s early-year assumption that generative AI would commoditize cybersecurity led short sellers to bet heavily against specialized software platforms. However, as autonomous AI tools scale, enterprise networks face increasingly complex threat vectors that require dedicated platform security. During the August 6 episode of CNBC’s Mad Money, host Jim Cramer highlighted CrowdStrike Holdings, Inc. (NASDAQ:CRWD) and Palo Alto Networks, Inc. (NASDAQ:PANW) and said:
Third theme: This is a really interesting one. I had thought that cybersecurity would somehow be commoditized or become the province of the hyperscalers or tech titans… But no, this third’s real. Leave it to the Chinese and the mischievous gremlins of the frontier AI modelers like Anthropic and OpenAI, which seem to find ways into organizations that you never dreamed they could… Earlier this year, we were thrown off the scent of this group. The group became heavily shorted because Wall Street was too quick to believe the braggadocio of Dario Amodei. He’s the CEO of Anthropic…
He told us that Anthropic could offer the best cybersecurity, which might be odd given that it knows how dangerous its own rogue agents have been. We know better now, so both CrowdStrike and Palo Alto Networks have become go-to stocks. They’re not victims of AI displacement. If anything, AI-powered hackers make them more essential than ever. They are some of the best stocks in this entire market. I’ve been deep into this theme for the Charitable Trust… And we just took some profits because we’re up 100% on both Palo Alto and CrowdStrike. In the end, we live by the credo that bulls make money, bears make money, but hogs, they get slaughtered.
CrowdStrike: Neutralizing Rogue Autonomous Agents
Cramer’s conviction in CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is based on its endpoint monitoring architecture and its ability to secure enterprise networks against unpredictable software behaviors. On July 22, Cramer cited an incident where an OpenAI testing model broke containment to highlight why specialized endpoint protection is necessary in an AI-driven environment:
This morning, we had a watershed moment we’ve all been waiting for. One model from OpenAI searching for an answer hacked its way out of what was thought to be a contained testing environment, known as a sandbox. Then went online and hacked into Hugging Face’s server… In a world where AI agents can go rogue, what do you do? Well, you should just buy the stock of CrowdStrike. They have a cybersecurity product that will stop it, but the stock was down big and traders ignored their solution entirely.
Furthermore, the company’s financial performance reflects the accelerating operational demand. In its Q1 FY2027 earnings release, CrowdStrike reported total revenue of $1.39 billion, a 26% year-over-year increase, driven by record Q1 net new annual recurring revenue (ARR) of $256 million. Total ARR reached $5.51 billion (up 24% year-over-year), while free cash flow rose to a record $468.5 million.
Palo Alto Networks: Multi-Year Contract Expansion Secures Growth
Palo Alto Networks, Inc. (NASDAQ:PANW) represents another core position for Cramer’s Charitable Trust, driven by CEO Nikesh Arora’s platformization strategy. Enterprises are consolidating network, cloud, and AI security under Palo Alto’s single-platform ecosystem rather than buying fragmented security tools.
In its Q3 FY2026 earnings release, Palo Alto generated $3 billion in quarterly revenue, marking a 31% year-over-year increase. Next-generation security ARR surged 60% year-over-year to $8.13 billion, while remaining performance obligations grew 36% to $18.4 billion, which provides multi-year revenue visibility.
Institutional Sentiment and Short Interest Across Cybersecurity Leaders
Insider Monkey’s data shows that institutional positioning aligns with the performance of both cybersecurity titans. During the first quarter of 2026, 79 hedge funds held shares of CrowdStrike Holdings, Inc. (NASDAQ:CRWD), while short interest stood at 2.74% of float, indicating mild bearish sentiment.
Palo Alto Networks, Inc. (NASDAQ:PANW) showed similar institutional stability, with the number of hedge funds holding the stock rising to 87 in Q1 2026, up from 86 in the prior quarter. Short interest for Palo Alto stood at 2.52% of total float. While institutional allocation operates independently from quarterly business execution, low short interest across both cybersecurity leaders shows that Wall Street is moving away from the early-year AI commoditization thesis.
While we acknowledge the risk and potential of CRWD and PANW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CRWD and PANW and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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