The AI Slowdown Trade Has Some Winners: CrowdStrike and Palo Alto Rally While Chips Fall

Sheryar Siddiq

Mon, September 21, 2026 at 12:23 AM GMT+3 4 min read

When Anthropic CEO Dario Amodei wrote an essay advocating that the AI sector should purposefully restrict its rate of progress, the initial market reaction appeared to be a simple risk-off move in chip stocks. By September 14, a more intriguing pattern had emerged: money wasn't just leaving AI infrastructure names, it was also moving into cybersecurity. During the session, Palo Alto Networks, Inc. (NASDAQ:PANW) rose as much as 13% and CrowdStrike Holdings, Inc. (NASDAQ:CRWD) increased nearly 14%, while NVIDIA and its chipmaking counterparts fell.

The Industry's Warning

Amodei's roughly 3,800-word essay, titled "We Must Pace the Frontier" and published on his personal website on September 12, proposed "pacing" AI capability development, which he defined as slowing the pace of advancement without abandoning commercial ambition or the United States' competitive position. He identified three threats that drive the argument: loss of control over increasingly autonomous systems, the exploitation of AI for cyberattacks and bioterrorism, and broader economic upheaval. Within hours, his main point, "we must slow the pace at which we improve the capabilities of AI models," was widely quoted across major media outlets.

The reaction of industry peers was surprisingly unanimous. OpenAI's Sam Altman stated on X that he agreed "with Dario that we need to pace the frontier," and told Fortune that taking OpenAI public this year would be "ill-advised." Elon Musk simply said, "Dario is right," while Google DeepMind head Demis Hassabis likewise expressed public agreement.

Why the Caution Translated Into a Cybersecurity Rally

The logic for connecting a safety essay to a cybersecurity rally is more direct than it appears. If frontier AI labs are warning that more powerful systems represent a more dangerous threat environment, it follows that companies will need to invest more on security, not less, regardless of the rate of model development.

CrowdStrike CEO George Kurtz stated the case directly and publicly, rejecting the slowdown concept entirely. He stated that frontier AI labs would continue to advance their technology regardless of what individual companies choose to do, and that the cybersecurity industry's role is to make that progress safer rather than slow it down. Following Kurtz's statements, CNBC's Jim Cramer responded strongly, calling CrowdStrike Holdings, Inc. (NASDAQ:CRWD) a "MUST BUY".

A History of Sharp Moves

Palo Alto Networks, Inc. (NASDAQ:PANW) and CrowdStrike Holdings, Inc. (NASDAQ:CRWD) have previously surged significantly together on an AI-related catalyst, and their recent history serves as a helpful reminder that these rallies can reverse quickly. Following the Black Hat security conference in early August, both stocks rose roughly 5% to new highs, with analysts claiming that AI agents were fundamentally transforming the cybersecurity threat picture. However, on September 1, CrowdStrike Holdings, Inc. (NASDAQ:CRWD) sank 7% and Palo Alto Networks, Inc. (NASDAQ:PANW) declined 6% in the same session, owing to a valuation-driven reversal triggered by rising Treasury yields, which hurt high-multiple software stocks widely, rather than a change in underlying demand.

Smart Money Sentiment

Institutional interest in both companies increased. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) saw hedge fund ownership rise from 79 in the first quarter to 89 in the second, with short interest at a low 2.46% of float. Palo Alto Networks, Inc. (NASDAQ:PANW) experienced a modest increase, from 87 to 89 funds, with short interest somewhat higher at 2.64%. Even before this specific rally, the increased ownership in both names implies that institutional investors had already begun to build confidence in the cybersecurity trade, independent of this particular trend.

AI Threat Hype or Real Demand?

The move is best viewed as a rotation trade built on top of an ongoing thesis, rather than a reaction to actual fresh demand data. Amodei's piece did not impact how much any company is spending on security, but it did crystallize a narrative: AI advancement widens the cyber threat surface, which cybersecurity companies have been constructing their growth stories around for some time. Given how strongly CrowdStrike Holdings, Inc. (NASDAQ:CRWD) and Palo Alto Networks, Inc. (NASDAQ:PANW) reversed just a few weeks ago on unrelated valuation issues, investors should approach the September 14 rally with caution rather than as confirmation of a sustained re-rating.

Insider Monkey's Verdict

For investors, the more useful signal will come from upcoming earnings, where actual bookings and demand commentary from both companies will either validate or refute the notion that AI-driven security spending is increasing, rather than just being a convenient narrative for a single strong trading session.

While we acknowledge the potential of CRWD as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on thebest short-term AI stock.

Disclosure: None. Follow Insider Monkey on Google News.