For months, investors worried that artificial intelligence would make cybersecurity stocks obsolete. The opposite is happening. AI is creating a new class of security threats, forcing companies to spend more to protect increasingly autonomous systems.
Bank of America analyst Tal Liani now sees those risks supporting higher valuations across the sector. His latest note, published Tuesday, raised price objectives for SentinelOne, Inc. (S), SailPoint, Inc. (SAIL), and Zscaler, Inc. (ZS).
The shift matters because cybersecurity is becoming less of an optional IT expense and more of an essential part of the infrastructure required to deploy AI safely.
AI Created a Problem Investors Initially Missed
The first wave of AI spending was easy to understand. Companies needed chips, servers, and data centers to run increasingly powerful models. The second wave is more complicated. AI agents can chain actions, interact across systems, and operate with limited human oversight. That creates more potential entry points for attackers.
"AI is shifting from a productivity story to a security spending catalyst," Liani said. More AI adoption means more systems to protect. It also creates new security products that did not exist in the same form before autonomous AI became widespread. "Managing AI agent identities is becoming a new enterprise security priority," he added.
That could become particularly important as companies give AI agents access to internal applications and sensitive data.
The Identity Problem Could Be Huge
An employee needs an identity. A server needs one. Increasingly, an AI agent will need one too. The difference is that an agent can potentially access applications and data while making decisions without constant human approval. That creates a new problem: determining what an AI agent can access and monitoring what it does.
SailPoint is targeting that opportunity. Liani maintained a Neutral rating on the stock but raised his price objective from $16 to $19. According to the analyst, SailPoint could benefit from the growing importance of identity governance as companies adopt cloud applications, machine identities, and AI workloads.
SentinelOne and Zscaler Are Expanding
SentinelOne is another example of the platform shift. Liani reiterated a Buy rating and raised his price target from $22 to $26. Data, AI, and Cloud products represented roughly half of annual recurring revenue in the first quarter of fiscal 2027.
Zscaler is approaching the opportunity through Zero Trust and cloud security. Liani raised its price target from $175 to $210, citing a stronger valuation framework for AI-enabled security platforms and continued adoption of Zero Trust architecture.
The Market Is Already Moving
Investors are starting to price in the shift. Over the past two months, the First Trust NASDAQ Cybersecurity ETF (CIBR) has gained 16.1% and the Amplify Cybersecurity ETF (HACK) has added 38%, against 3.6% for the S&P 500, according to the note.
Valuations have expanded alongside the rally. The median enterprise-value-to-2027-sales multiple across the cybersecurity group rose to 5.8 times from 4.5 times two months earlier. That creates the key risk: investors may already be anticipating stronger AI-related security spending. The next leg depends on whether that spending becomes durable revenue growth.
If AI agents become standard enterprise tools, cybersecurity could become an unavoidable cost of the AI revolution.
