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Why Crowdstrike Stock Is Soaring Today
CrowdStrike Holdings (NASDAQ: CRWD) stock is seeing strong bullish momentum in Tuesday's trading. The cybersecurity company's share price was up 9.3% as of 3:15 p.m. ET today. Meanwhile, the S&P 500 index was up 0.9%, and the Nasdaq Composite index was up 2%.
CrowdStrike's valuation is bouncing back after concerns about DeepSeek's new AI model spurred dramatic sell-offs for the tech sector yesterday. Besides seeing recovery momentum in conjunction with gains for the broader market today, the stock is getting a boost from new attention being brought to cybersecurity issues and the AI competition between the U.S. and China.
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CrowdStrike's focus bounces back with AI and cybersecurity in focus
Tech stocks saw dramatic sell-offs yesterday as investors and analysts weighed in on the new R1 AI software from DeepSeek, a Chinese company. It was reportedly developed and trained using far less hardware power than OpenAI's leading ChatGPT software. R1 is also supposedly more capable and far more efficient in some respects, leading investors to consider whether an AI paradigm shift is underway.
Along with the possibility that advanced AI systems could require significantly less powerful hardware and energy and cooling capacity, DeepSeek's software also raised fears that the U.S. was losing ground to China in the AI race. But tech stocks are seeing recovery momentum today as investors continue to digest information surrounding R1.
The new software is impressive, but many details about its creation and processing requirements are still unknown. Rising competition between the U.S. and China in the AI and cybersecurity spaces is also highlighting the importance of CrowdStrike's end point and network protection services, and the stock is making big gains today thanks to this combination of dynamics.
What comes next for CrowdStrike?
CrowdStrike is a leading provider of end point protection, and its cybersecurity platform has seen strong growth thanks in large part to the AI-related strengths it offers. With its last quarterly report, management announced that revenue had increased 29% year over year to hit $1.01 billion.
The business posted a 78% gross margin for its subscription services, which accounted for roughly 96% of overall revenue. Thanks to the strong sales expansion and margins, adjusted net income for the period still rose 17.6% year over year to hit $234.3 million despite a large increase in operating expenses.
Following today's gains, the stock is now valued at roughly 109 times this year's expected earnings and has a market capitalization of roughly $101 billion. While the current valuation may look rich given the pace of recent earnings growth, the company will likely see operating expenses rise slower and return to stronger profit expansion next year.
For long-term investors seeking exposure to the cybersecurity space, CrowdStrike stock continues to be a worthwhile portfolio addition.
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Keith Noonan has positions in CrowdStrike. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool has a disclosure policy.
