Microsoft, Palo Alto, CrowdStrike may benefit from $30B AI gain

Artificial intelligence is certainly the story of the year in technology and perhaps the story of the decade, as every company rushes to implement an AI strategy, akin to the early days of the internet.

With the number of concerns about the global economy continuing to rise, including labor shortages and rising threats from hackers, investment firm Morgan Stanley said the cybersecurity industry could reap as much as $30B (or more) in productivity gains from AI-driven automation, with much of the reward going to a select few.

A team of analysts believe the gains will go to platforms such as Palo Alto Networks (NASDAQ:PANW), Microsoft (NASDAQ:MSFT) and CrowdStrike Holdings (NASDAQ:CRWD), as the industry itself deals with a 30% year-over-year rise in ransomware attacks and a “significant” increase in email phishing campaigns since the launch of ChatGPT, created by Microsoft-backed OpenAI.

When coupled with the fact that the industry may be facing a workforce shortage of as many as 3.4M people, the analysts believe the industry needs to ramp up its use of AI.

“With generative AI being used to create and mutate malware faster than ever before, we think this significantly increases the need for overburdened security organizations to invest in automation,” the analysts wrote.

Delving deeper, the analysts think 20% to 40% of a security analysts’ time could be automated by AI, worth roughly $100B in potential cost savings. Of that $100B, it’s estimated between 10% and 50% could be captured by Microsoft (MSFT), Palo Alto Networks (PANW) and others, like Fortinet (FTNT) and CrowdStrike (CRWD).

Other beneficiaries include Snowflake (SNOW), given its focus on data lake and analytics, and Google (GOOG) (GOOGL) due to its data sets and “best-in-class security services,” including last year’s acquisition of Mandiant.

Among the areas where Morgan Stanley thinks automation will help include added productivity gains for existing security analysts, as they move from ad hoc, bespoke tasks that can be automated and the safe and secure use of AI models.

The analysts also believe that certain areas of AI can add improvements given that large language models are able to generate content and recommendations faster than humans. Areas such as security analytics, app security, vulnerability management and data protection could all see “real benefits,” the analysts suggest.

Despite all the buzz surrounding AI, the advancements being made in the space and whether it’s as revolutionary as the internet, there are risks.

Morgan Stanley’s analysts believe that the cybersecurity space, which has historically been cautious given the broader implications of the risks at stake, may take a somewhat measured approach to AI implementation.

“We expect a ‘co-pilot’ approach initially vs full automation, as humans will still be required to ultimately make security decisions,” the analysts wrote.

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