Nikesh Arora is getting some good vibes out of D.C.
The chairman and CEO of cybersecurity company Palo Alto Networks (PANW) believes the incoming Trump Administration will be good for business.
"I think all of us believe that a quick decisive outcome was a good outcome," Arora told CNBC on Nov. 8. "I think generally the feeling is this is a business-friendly administration. Going in, you're more than likely going to see some decisions which are possibly going to accelerate investment in AI."
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Arora, who has worked for such big time tech names as Google (GOOGL) and Japanese investment company SoftBank Group, said that "the faster technology investment happens, the more you have to make sure you secure the investment."
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"If you think about it, there's $300 billion to $500 billion being talked about as being needed to be invested in AI in the next two years," he said. "Cybersecurity typically looks at 2% to 5% of that as what you need to protect that, so it looks like our addressable market is going to increase by billions of dollars."
Cybersecurity risks increase with AI adoption
Industry experts say that cybersecurity is growing in importance as more companies use artificial intelligence.
Sixty-five percent of the respondents to the McKinsey Global Survey on AI, which was released in May, said their companies regularly use generative AI, nearly double the percentage from our previous survey just ten months ago.
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Half of the respondents said they continue to view cybersecurity as a risk.
The National Institute of Standards and Technology said in a recent study that despite the significant progress AI and machine learning have made, they are “vulnerable to attacks that can cause spectacular failures with dire consequences.”
The federal agency said adversaries can deliberately confuse or even “poison” AI systems to make them malfunction, and there is no foolproof defense that their developers can employ.
Victor Benjamin, assistant professor of information systems at Arizona State University, said in an interview last month that "the threat posed by AI-driven cyberattacks significantly differs from traditional cyberattacks in terms of sophistication and scalability."
"AI allows attackers to target a wide variety of systems, each with unique vulnerabilities, all at once," he said. "What once required specialized expertise can now be done by novices using AI tools, making it easier for more people to launch attacks."
Cyberattacks, like death and taxes, aren't going away, but Benjamin said companies can take steps to reduce their exposure.
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"The best approach is a combination of advanced tools coupled with cybersecurity education to help individuals become more mindful and secure," he said. "AI-powered cybersecurity tools can leverage enhanced pattern-detection capabilities to identify network intrusions, novel malware and other threats."
Arora told CNBC that getting good AI delivered requires good data to properly train the models.
Analyst sees upside to Palo Alto's bookings
"AI is actually advantaging incumbents," he said. "If you actually have a lot of data you can parse to have the models trained on, which allows you a leg up compared to anybody who's starting from scratch."
AI can be used to plan a cyberattack faster, Arora said, which drives the need for more up-to-date infrastructure, "which means it's a good thing for cyber security companies."
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"A lot of the infrastructure out there in cybersecurity is still old, so our job is to go modernize that as quickly as we can," he said. "So AI acts as a bit of a tailwind from a modernization perspective...it opens up a whole new category of technology which we have to protect."
Palo Alto Networks is scheduled to report first-quarter results on Nov. 20,
Shares of Palo Alto Networks are up 35% year-to-date and the stock has climbed 57.1% from a year ago.
Last year, Palo Alto Networks adopted a strategy of platformization, which involves bundling the company’s products and services.
Arora acknowledged during the company's Aug. 19 earnings call that "there was significant consternation around our platformization strategy six months ago," but he told analysts that "I wish we had started down that path sooner."
As AI adoption rapidly increases, Arora warned that "innovation is driving the speed of adoption, while security might be an afterthought."
"At the same time, adversaries are leveraging AI capabilities to broaden attacks, better target organizations, and scale the malicious activity beyond the capabilities of defenses that rely solely on humans," he said.
"This environment, paired with an ever more challenging threat landscape and a complex set of point products that are not well-integrated or even coordinated, is driving a growing need for platformization," Arora added.
Analysts at Barclays noted Palo Alto Networks' strategy in a Nov. 11 research note, according to The Fly.
The firm raised its price target on the company to $425 from $410 and kept an overweight rating on the shares ahead of the earnings report.
Barclays said it sees upside to fiscal Q1 bookings and annual recurring revenue on better channel checks, strength in platformizations, and seasonality.
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