Key facts
- Société Générale sees further upside in cybersecurity stocks.
- The firm's cybersecurity basket has a 12-month forward PE ratio of around 25.
- This valuation is below the basket's average of 30.2 since 2018.
- Cybersecurity stocks have shown low, sometimes negative, correlation with semiconductor stocks in 2026.
- EPS growth for the sector has compounded at approximately 16% annually since 2020.
Société Générale believes cybersecurity stocks are well-positioned to benefit from increased spending on AI safety infrastructure, even after a recent rally. Manish Kabra, the firm's chief US equity strategist, noted in a client note that the sector's earnings-per-share growth has compounded at approximately 16% annually since 2020, while valuations remain broadly in line with historical averages. This suggests further upside potential.
The bank highlighted that as governments and industries focus on AI safety, investment is expanding beyond computing power to the necessary infrastructure for securing and governing AI systems. Société Générale has compiled a basket of 10 stocks that offer exposure to this theme. This basket currently trades at a 12-month forward price-to-earnings ratio of around 25, which is below its average of 30.2 since 2018. Furthermore, the basket offers diversification from the traditional AI trade, having shown low, and at times negative, correlation with semiconductor stocks in 2026.
While the full list of companies was not disclosed, the top stocks in the basket include Palo Alto Networks (PANW), CrowdStrike (CRWD), Cloudflare (NET), Fortinet (FTNT), and Zscaler (ZS). Last week, the Global X Cybersecurity ETF (BUG) rose 10%, with Palo Alto Networks and CrowdStrike gaining 10% and 15% respectively.