Following a significant drop earlier this month driven by fears surrounding AI's impact, cybersecurity stocks have staged a robust recovery, with Société Générale optimistic about the continuation of this upward trend.
The Global X Cybersecurity ETF (BUG) experienced a surge of 10% just last week. Major players in the sector, including Palo Alto Networks (PANW) and CrowdStrike (CRWD), recorded impressive gains of 10% and 15%, respectively, during the same period. This recent performance builds on the already notable year-to-date achievements.
Manish Kabra, who serves as the chief equity strategist for the U.S. at Société Générale, commented in a client update on Thursday that even amid this recent increase, the underlying fundamentals of the sector indicate potential for further growth.
According to Kabra, "EPS growth has compounded at around 16% annually since 2020, compared to 10% in the prior decade." He emphasized that despite the rally, valuations are still largely aligned with historical averages.
Kabra further pointed out that as governments and industries prioritize AI safety, expenditures are shifting from mere computational resources to the vital infrastructure required for the security and governance of AI systems.
Société Générale has curated a collection of stocks that reflect the cybersecurity theme, exhibiting a 12-month forward price-to-earnings ratio of approximately 25, which is notably lower than the historical average of 30.2 dating back to 2018.
Additionally, this collection offers investors some diversification away from the conventional AI sector, showing a low, and at times negative, correlation with semiconductor stocks noted in 2026.
While the bank has not released the complete list of companies, it did disclose the top 10 stocks included in its cybersecurity portfolio to Business Insider.
