AI Fuels Cybersecurity Spending Despite Market Volatility: Wedbush Insights

Cybersecurity stocks have faced headwinds in early 2026 amid a broader AI-driven sell-off in the software sector. However, Wedbush analyst Dan Ives suggests this downturn may present a buying opportunity, driven by the increasing necessity of cybersecurity in an AI-dominated landscape.

AI as a Tailwind for Cybersecurity

Ives believes that artificial intelligence will be a significant driver for the cybersecurity sector in the coming years. “AI will be a major tailwind to the cyber security sector over the coming years as protection of use cases, data, and finish points expand markedly,” Ives wrote in a research note published on February 13, 2026.¹ The rise of AI-driven threats is transforming cybersecurity from a discretionary expense into a mission-critical investment for companies.

Demand Outpacing Software Budgets

As hackers leverage AI to launch faster and more sophisticated attacks, corporations are compelled to increase their spending on defense. Wedbush data indicates that cybersecurity vendors are raising their sales targets by as much as 30% this year to meet growing demand.¹ This suggests that while overall enterprise software budgets may be under scrutiny, security remains a top priority.

Market Performance and Investor Concerns

Despite the long-term optimism, cybersecurity sector trackers have experienced recent declines. The First Trust Nasdaq Cybersecurity ETF (CIBR) is down roughly 9% in the past month, while the WisdomTree Cybersecurity Fund (WCBR) has slipped about 5%. Year-to-date, these ETFs are down approximately 3% and 7%, respectively.²

While some investors see a generational opportunity as AI expands the “attack surface” for firms, others worry that slowing revenue growth and high valuations could hinder certain companies. A key concern is whether the “AI tax” on corporate budgets will divert funds from other IT areas, creating a competitive environment for cybersecurity firms.

Wedbush’s Top Cybersecurity Picks for 2026

Ives identified three companies poised to benefit from this shift:

CrowdStrike (CRWD)

CrowdStrike is considered the “gold standard” in the industry. Wedbush believes its Falcon platform is becoming increasingly effective against evolving hacker threats. Despite a nearly 13% year-to-date decline in share price, Wedbush maintains an Outperform rating and a $600 price target for CrowdStrike.²

Palo Alto Networks (PANW)

Palo Alto Networks remains a Wedbush favorite for 2026, despite a nearly 12% year-to-date drop in its stock. Ives highlights the company’s “platformization” approach and the acquisition of CyberArk as game-changers for securing AI data pipelines. Wedbush issued a $225 target on the stock.²

Zscaler (ZS)

Zscaler is highlighted as a premier name to own, with a $350 price target. Wedbush notes that the company’s “Zero Trust” strategy is experiencing robust subscription growth as enterprises grapple with accelerating AI traffic.²

The Future of Cybersecurity in an AI-Driven World

For investors, AI is not merely a buzzword in the cybersecurity sector; it’s a force validating high-margin, recurring revenue models. As the attack lifecycle shrinks, the demand for automated, AI-driven defense will likely increase, reinforcing budget resilience in the evolving IT landscape.²

¹ Wedbush Funds – IVES

² Yahoo Finance – Dan IVES Wedbush AI Revolution ETF (IVES)