TLDR
- Anthropic launched Claude Code Security, an AI tool that scans code for vulnerabilities, spooking the cybersecurity sector.
- CrowdStrike fell 11% and Zscaler dropped 10% on Monday; JFrog tumbled 25% on Friday.
- J.P. Morgan analyst Brian Essex called the selloff “relatively indiscriminate” and reiterated Overweight ratings on all five stocks.
- CrowdStrike CEO George Kurtz pushed back, saying AI increases the need for security, not reduces it.
- Analysts at BTIG said Claude Code Security and JFrog are more complementary than competitive.
Cybersecurity stocks took a beating this week after Anthropic unveiled Claude Code Security, a new AI-powered tool built into its Claude model that scans codebases for vulnerabilities and suggests patches for human review.
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The announcement hit the sector hard. CrowdStrike closed Monday down 9.85%, settling at $350.33. Zscaler fell 10.31%. SailPoint dropped 7.6%, JFrog slid 5.5%, and Palo Alto Networks declined 2.5%.
The initial damage actually started Friday, when JFrog took the worst of it — tumbling 25% in a single session.
CrowdStrike Holdings, Inc., CRWD
The fear is straightforward: if an AI model can do some of what these companies charge for, the business case for their products weakens. That anxiety drove a fast, broad selloff across the sector.
J.P. Morgan analyst Brian Essex acknowledged the nervousness but didn’t think it was warranted. “It remains challenging to disprove a negative,” he wrote in a note Monday, describing the market’s reaction as a “sell first, ask questions later” environment.
He called the selloff “relatively indiscriminate.”
What Claude Code Security Actually Does
Claude Code Security is being released as a limited research preview for Claude enterprise and group customers. It scans code for security flaws and recommends fixes, but a human still reviews those suggestions.
Analysts at BTIG pointed out that Claude Code Security and JFrog aren’t really going after the same thing. Claude focuses on source code; JFrog secures software binaries — the machine-readable version of code. “If software is a cake, Claude Code Security perfects the recipe while FROG ensures the ingredients are not poisonous,” they wrote. BTIG kept its Buy rating on JFrog.
CrowdStrike CEO George Kurtz didn’t stay quiet either. In a LinkedIn post Sunday, he made the case that AI actually creates more demand for security, not less. “If you want to build AI, you need GPUs. If you want to deploy AI, you need security,” Kurtz wrote.
What Analysts Are Saying
Essex at J.P. Morgan reiterated Overweight ratings on all five affected stocks. His argument: the threat landscape is growing faster than ever, and established vendors have real advantages that are hard to replicate — customer trust, proprietary data, and technical depth.
New AI coding tools have actually introduced new security risks, which means demand for cybersecurity products isn’t shrinking anytime soon. Essex pointed to CrowdStrike’s broad customer network as a specific advantage: the more customers on the platform, the better the product gets.
CRWD has dropped 14.12% over the past month, underperforming both the Computer and Technology sector (up 0.34%) and the S&P 500 (up 1.75%) over the same period.
By Tuesday premarket, some calm had returned. CrowdStrike was up 0.3%, Zscaler up 0.5%, with SailPoint, JFrog, and Palo Alto also ticking higher.
CrowdStrike is set to report earnings on March 3, 2026. Analysts expect EPS of $1.10, representing 6.8% year-over-year growth, with revenue projected at $1.3 billion — up 22.48% from the same quarter last year.
The stock currently trades at a forward P/E of 80.07, well above the industry average of 39.88.
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