What Happened?
A number of stocks fell in the afternoon session after the cybersecurity sector sold off amid renewed concerns about competition from artificial-intelligence models.
The drop across the industry, which also hit peers like CrowdStrike and Palo Alto Networks, came after a report revealed that AI company Anthropic was developing a new model called "Claude Mythos." This new model reportedly showed dramatically higher scores on cybersecurity tests. Investors feared the AI model could become so effective at detecting threats that it might reduce demand for traditional cybersecurity services. The broader market also plunged during the session due to geopolitical uncertainty, adding to the negative sentiment.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Endpoint Security company Varonis Systems (NASDAQ: VRNS) fell 3%. Is now the time to buy Varonis Systems? Access our full analysis report here, it’s free.
- Identity Management company Okta (NASDAQ: OKTA) fell 7.4%. Is now the time to buy Okta? Access our full analysis report here, it’s free.
- Network Security company Palo Alto Networks (NASDAQ: PANW) fell 6.5%. Is now the time to buy Palo Alto Networks? Access our full analysis report here, it’s free.
- Vulnerability Management company Qualys (NASDAQ: QLYS) fell 5.8%. Is now the time to buy Qualys? Access our full analysis report here, it’s free.
- Vulnerability Management company Rapid7 (NASDAQ: RPD) fell 5.4%. Is now the time to buy Rapid7? Access our full analysis report here, it’s free.
Zooming In On Okta (OKTA)
Okta’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 6% on the news that Anthropic announced that its Claude AI assistant can now control computers to complete tasks by imitating human keystrokes and mouse movements.
Investors reacted to the possibility that enterprise value would migrate from the application layer to the intelligence layer, leaving legacy software providers vulnerable to displacement by autonomous agents that can operate across platforms. Analysts added that the "agentic era" could lead to massive margin compression as software companies lose their pricing power.
Adding to the news, the company reported that board member Jeff Epstein planned to step down from its Board of Directors, effective at the company's 2026 annual meeting of stockholders.
The company stated that his departure was not due to any disagreement with Okta. The stock's decline also happened amid broader pressure on the software sector, as concerns about surging oil prices and persistent inflation weighed on growth-oriented technology names.
Okta is down 13.4% since the beginning of the year, and at $72.44 per share, it is trading 43.1% below its 52-week high of $127.30 from May 2025. Investors who bought $1,000 worth of Okta’s shares 5 years ago would now be looking at only $335.65.
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