The Next Big Cybersecurity Threat: Artificial Intelligence (AI). 2 Stocks to Buy Right Now.

Feb 21, 2024

Each year, global consulting firm PwC surveys thousands of leading CEOs to gauge their temperature on the risks and opportunities facing their businesses. PwC just released the 27th edition of that survey, and it revealed some very useful insights about the world’s most dominant technology trend right now: artificial intelligence (AI).

Of the 4,702 respondents, 64% believe generative AI will increase cybersecurity risks in their organization over the next 12 months. It was the leading concern as it relates to AI, outranking the spread of misinformation and the potential reputational risks it could cause.

Generative AI has the ability to create hyperrealistic emails for phishing scams, and it can even produce deep fake audio recordings designed to impersonate executives over the phone. These sneaky attacks are targeted at employees to convince them to click on malicious links or hand over sensitive information, and it’s becoming harder for the average person to tell the difference between what’s real and what isn’t.

As a result, proactive and automated cybersecurity software is more critical than ever. Here’s why Tenable (NASDAQ: TENB) and CrowdStrike (NASDAQ: CRWD) will likely benefit significantly from the explosion in AI-based cyberattacks.

1. Tenable is a leader in vulnerability management

Ignoring cyber threats is no longer an option for companies that operate online. Deploying proactive cybersecurity tools to constantly identify vulnerabilities before they can be exploited should be a core pillar of every cyber strategy. Tenable’s Nessus platform is the most widely deployed vulnerability management tool in the cybersecurity industry.

Nessus actively scans operating systems, devices, and cloud networks looking for points of vulnerability that could be used by a malicious actor to launch an attack. It offers the broadest coverage of any tool of its kind, protecting against over 82,000 known common vulnerabilities and exposures — and it’s also the most accurate in identifying them.

But Tenable has expanded far beyond Nessus. It offers a host of specific tools for advanced cloud protection, identity protection, and attack surface management, among others. It also offers a tool called ExposureAI, which uses generative AI to help security teams get a tighter grip on potential attack paths. It can find, explain, and recommend actions to limit exposures proactively.

Tenable serves more than 40,000 organizations worldwide. At the end of 2023, 1,721 of those customers were spending at least $100,000 per year on its products. That number grew by 21% compared to the year-ago period, which highlights the growing need for advanced cybersecurity in larger organizations.

Tenable delivered $798.7 million in revenue during 2023, which was up 17% year over year and comfortably above its prior forecast.

But that is a mere drop in the bucket compared to the company’s addressable market, which it estimates will grow to $33 billion by 2027. Tenable stock is relatively cheap compared to many of its peers in the cybersecurity industry, and that makes it an enticing opportunity for investors.

2. CrowdStrike is a leader in AI-powered cybersecurity

As I touched on earlier, employees are often the most vulnerable part of any organization when it comes to cyber threats. CrowdStrike estimates that 90% of all successful attacks originate at the endpoint — the computer or device used by staff members to access emails, messaging platforms, and the broader internet.

CrowdStrike is an endpoint protection specialist, but its flagship Falcon platform is a holistic solution for enterprises seeking full protection in the cloud and identity spheres, too (among others). AI is at the core of its software; as one of the largest cybersecurity providers in the world, CrowdStrike has an enormous, growing pool of data to draw upon to train its models.

In fact, the company’s AI observes over 2 trillion security events per day, and it makes a mind-boggling 180 million indicator-of-attack (IoA) decisions every second. An example of an IoA is when an employee falls prey to an email phishing scam, which is often the first stage of a potential breach. Therefore, the more IoAs and events CrowdStrike observes through its customers, the smarter its AI becomes at autonomously preventing such occurrences.

CrowdStrike will report its financial results for the fiscal 2024 full year (ended Jan. 31) next month. However, in the recent fiscal 2024 third quarter (ended Oct. 31), the company’s annual recurring revenue (ARR) surpassed $3 billion for the first time. There could be substantial growth on the horizon, though, because management has outlined a plan to more than triple its ARR to $10 billion within the next seven years.

CrowdStrike shares are trading at an all-time high, but that shouldn’t be surprising given the recent survey results out of PwC. The stock is relatively expensive at a price-to-sales (P/S) ratio of 27.7 — Tenable stock trades at one-third of that — which is something investors should consider before buying.

However, the need for CrowdStrike’s AI-powered products will likely increase going forward, so investors with a time horizon of at least five years could potentially do very well by owning the stock.

Should you invest $1,000 in Tenable right now?

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool has a disclosure policy.

The Next Big Cybersecurity Threat: Artificial Intelligence (AI). 2 Stocks to Buy Right Now. was originally published by The Motley Fool

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