Key Takeaways
- Major cybersecurity names plummeted Friday following reports that Anthropic is developing Mythos, an advanced AI model with sophisticated cyber capabilities
- The iShares Cybersecurity ETF (IHAK) declined 4.5% during Friday’s trading session
- CrowdStrike, Palo Alto Networks, and Zscaler experienced approximately 6% losses; Tenable suffered a 9% decline
- The selloff arrived just after Morgan Stanley identified five cybersecurity companies as preferred investments, highlighting AI-driven security demand
- Cybersecurity equities have faced sustained headwinds throughout the year from concerns over AI-driven disruption and earlier Anthropic product releases
The cybersecurity sector experienced a sharp downturn Friday following a Fortune report revealing Anthropic’s development of an AI system named Mythos. According to the article, which referenced a publicly available draft blog entry, Mythos represents Anthropic’s most sophisticated model to date, featuring advanced cybersecurity capabilities that present notable security implications.
The company indicated plans for a gradual deployment strategy due to these security considerations. Anthropic had not provided an immediate statement to CNBC’s inquiry at the time of publication.
Financial markets responded immediately. The iShares Cybersecurity ETF (IHAK) experienced a 4.5% decline during the session. CrowdStrike (CRWD), Palo Alto Networks (PANW), and Zscaler (ZS) all registered approximately 6% losses. SentinelOne (S) plunged 6%, while Okta and Netskope suffered declines exceeding 7%. Tenable (TENB) posted the steepest loss, dropping 9%.
This marks the second significant selloff triggered by Anthropic announcements. A previous downturn occurred last month when Anthropic integrated a code-scanning security feature into Claude. The underlying worry remains consistent: offensive AI capabilities create escalating pressure on defensive security providers.
Anthropic revealed in November that a Chinese state-affiliated entity had leveraged Claude to facilitate automated cyberattack operations.
Individual Stock Performance Analysis
CrowdStrike (CRWD) experienced approximately 6% losses during Friday’s session. Morgan Stanley recently elevated the company to preferred status, highlighting its exclusive telemetry data and kernel-level monitoring as strategic advantages. The firm unveiled the Charlotte AI AgentWorks Ecosystem through partnerships with AWS and NVIDIA, while broadening its Intel relationship to enhance the Falcon platform for AI-powered PCs.
CrowdStrike Holdings, Inc., CRWD
Palo Alto Networks (PANW) similarly declined roughly 6%. Morgan Stanley considers the company well-positioned amid the AI security transformation. Its Prisma AIRS platform designed for securing AI agent operations has attracted over 100 initial adopters, while its XSIAM solution boasts more than 600 clients with net revenue retention surpassing 120%. The firm also unveiled a new Prisma Browser alongside a platform for automated digital certificate oversight.
Zscaler (ZS) experienced approximately 6% losses. The stock participated in the sector-wide downturn but received no specific analyst commentary in Morgan Stanley’s research note.
SentinelOne (S) dropped 6%. Morgan Stanley maintains an Equal-weight stance on the shares. Company leadership emphasized kernel-level telemetry as a critical competitive advantage and referenced strengthening pipeline dynamics as evidence of potential growth acceleration. FY27 guidance midpoint targets approximately 20% revenue expansion. The firm recently disclosed an extended multi-year partnership with Google Cloud and appointed Barry Padgett as its new president and COO.
Okta (OKTA) fell more than 7%, representing one of the session’s steeper declines. The identity security segment faces particular vulnerability to concerns surrounding AI-powered credential compromise attacks.
Tenable (TENB) led sector losses with a 9% drop, absent any company-specific news catalyst.
Morgan Stanley’s Recommendations — Issued Just Before The Decline
Morgan Stanley had published its favored cybersecurity investments following executive meetings and insights gathered at the RSA Conference. The investment bank spotlighted Microsoft (MSFT) for its Security Copilot deployment and approximately $20 billion security revenue run rate, alongside SailPoint for its identity security capabilities surrounding agentic AI applications.
The sequence of events illustrates the rapid sentiment reversals characteristic of this sector.
The iShares Cybersecurity ETF (IHAK) trades lower year-to-date, pressured by persistent AI-disruption concerns affecting the broader software industry.
