Quick overview

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Anthropic PBC added a new security feature to its Claude AI model, which caused shares of cybersecurity software companies to plummet. Cloudflare posted a dip of 8%, while CrowdStrike Holdings was one of the largest decliners, dropping  8%.

 

Okta Inc., SailPoint, and Zscaler all posted major drops; the Global X Cybersecurity ETF dropped 4.9 percent. The new tool “identifies security flaws in codebases and recommends specific software fixes for human review,” according to Anthropic.

The update is currently only available in a limited research preview, according to the company.

Concerns about competition from AI-native firms have caused software shares to decline, as evidenced by the recent decline in cybersecurity stocks. For weeks, anxiety has been increasing.

This year, the iShares Expanded Tech-Software Sector ETF has lost over 23%, and it is on pace experience its largest quarterly percentage decline since the 2008 financial crisis. Dennis Dick, head trader at Triple D Trading, stated, “Software has been selling steadily, and today security is getting a mini-flash crash on a headline.”

Investors find this type of market unsettling because, as soon as there is even the slightest indication of a disruption, the market simply spirals downward.

Being cautious makes sense because, despite suggestions that the software drop was excessive some time ago, it continues to occur.

New AI tools from firms like Anthropic, OpenAI, and Alphabet Inc. have accounted for a large portion of the sales. Investors are concerned that the ability to “vibe code”—write software code using AI—will enable users to develop their own applications, reducing the need for legacy products and impacting businesses’ ability to grow, make money, and set prices. The group’s volatility demonstrates how businesses can be classified as possible AI losers.

Cloudflare, which surged in late January amid reports of growing adoption of an open-sourced AI assistant that collaborates with Anthropic’s Claude, has been viewed as a stand-in for Anthropic’s ascent to prominence.

Though “headline headwinds are likely to intensify before clarity and cyber inflection from securing AI materializes,” Joseph Gallo, an analyst at Jefferies, believes cybersecurity will ultimately benefit from AI. He went on to say that Anthropic’s announcement has wider ramifications because AI providers “will announce more products & compete for incremental.