Top Software Stocks Positioned for AI Security Boom According to Morgan Stanley

This read-through is less about near-term multiple expansion and more about a medium-cycle budget reallocation within enterprise security. The key second-order effect is that AI does not just create new spend; it shifts spend from prevention-heavy point tools toward runtime, identity, and platform controls where incumbents already sit on the critical path. That makes the “AI-native disruption” narrative look overstated for the names with embedded workflow data and enforcement points, while more commoditized prevention vendors remain structurally exposed.

The market is likely underappreciating the duration of the spend cycle: if AI agents and machine identities scale over the next 12-24 months, identity governance becomes less of a compliance line item and more of a control plane budget item. That favors the highest-trust platforms with broad policy enforcement, but also creates a buyer preference for consolidated vendors that can reduce tool sprawl. In that setup, the biggest hidden winner may be the company that can bundle security into a broader platform sale rather than win purely on best-of-breed product claims.

The main risk is timing. The revenue re-rate could lag the narrative by several quarters because customers will pilot AI security before they re-baseline budgets, and procurement can still delay large-scale conversion from incumbent tools. If AI threat intensity proves lower than assumed, or if agent adoption is slower than hype, the premium attached to runtime and identity layers can compress quickly. In other words, this is a good thematic trade, but the catalyst path likely stretches from days to multiple quarters, not weeks.

Consensus appears to be over-focusing on headline disruption risk and underpricing the incumbent monetization of AI fear. The more interesting contrarian view is that the winners may actually have more pricing power than the market expects because AI expands the number of protected entities faster than it expands the number of budget owners. That said, valuations will be sensitive to any evidence that AI security is being sold as a feature rather than a standalone SKU, especially in the two names with the richest growth expectations.