Chinese artificial-intelligence is becoming increasingly competitive with U.S.-developed models. That might be a threat to the wider AI trade, but it's good news for cybersecurity stocks, according to analysts at J.P. Morgan.
Chinese AI models are closing the gap with American peers in many areas -- especially the ability to detect cybersecurity vulnerabilities. Tuesday, the Wall Street Journal reported that security researchers say the latest release from China's Zhipu AI is as good as the latest U.S. models at finding security bugs, while also being open to modification, which could make it ideal for hackers.
"This comes at a time when enterprises are preparing to assess and manage a 'tsunami of vulnerabilities' expected across their IT estates, and the progress of the Chinese models likely accelerates levels of urgency," wrote J.P. Morgan analyst Brian Essex.
Problems for some mean opportunities for others. Leading cybersecurity companies CrowdStrike and Palo Alto Networks should benefit from additional demand due to their broad portfolios and early moves into AI-enhanced security, according to Essex, who has an Overweight rating on both stocks.
CrowdStrike and Palo Alto's shares have had a mixed record when it comes to AI, initially retreating on fears that it would make their technology irrelevant. However, they have risen strongly in the past three months as a partnership with Claude-developer Anthropic has reassured investors they can respond to new AI threats.
However, Essex says there could be a couple of lesser-known beneficiaries, as well. The J.P. Morgan analyst has an Overweight rating on Tenable, a cybersecurity company providing tools to help organizations identify their exposure to vulnerabilities.
"We think an acceleration in vulnerability volumes will likely lift exposure management vendors...and we view Tenable as best positioned to benefit," Essex wrote.
Essex has a $40 target price on Tenable, which was up 5.3% at $35.28 in early trading.
The analyst also upgraded his rating on cybersecurity and compliance company Qualys to Neutral from Underweight. He has a $139 target price on the stock, which was up 6% at $135.96 in morning trading.
"We think [Qualys] will also benefit across its core installed base, and we could see upside to growth expectations in spite of the execution issues that the company has been managing through," Essex wrote.
Write to Adam Clark at adam.clark@barrons.com
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(END) Dow Jones Newswires
June 30, 2026 11:34 ET (15:34 GMT)
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