Has the AI sell-off made cybersecurity more compelling?

Cybersecurity stocks faced a sharp sell-off in February 2026, as investors reassessed the impact of new agentic AI tools on the software sector. But while markets focused on disruption, the underlying forces driving cybersecurity demand may be strengthening.

AI is not only changing the technology landscape, it is reshaping the threat environment. Techniques such as prompt injection attacks and AI agent impersonation are expanding the toolkit available to bad actors. In practice, this means the frequency and sophistication of cyber threats is likely to increase rather than diminish.

At the same time, geopolitical tensions are reinforcing the importance of robust cyber defences. Cyber operations have become a strategic tool for nation states, targeting everything from communications systems to critical infrastructure. For businesses and governments alike, cybersecurity is increasingly viewed as essential.

This dynamic shows up clearly in spending patterns. According to Morgan Stanley surveys of Chief Information Officers, security software is the part of IT budgets they are least willing to cut. And global cybersecurity spending is forecast to reach US$308 billion in 2026, according to the International Data Corporation

The scale and resilience of this spending are also reflected in rising M&A and deal activity across the sector. Larger cybersecurity platforms are consolidating ‘best-of-breed’ security tools into one integrated ecosystem, while combining AI capabilities with vast proprietary datasets and broad product ecosystems.

Against that backdrop, the companies best positioned in cybersecurity may be those with the scale, technology and data to stay ahead of an evolving threat landscape. In the video below, we explore why these structural forces could continue to support the investment case for cybersecurity.