Why Palo Alto Networks Stock Dropped Today
Key Points
Rumors of a "Claude Mythos" cybersecurity program worry Palo Alto investors.
The new AI model may be the "most powerful" Anthropic has ever produced.
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Palo Alto Networks (NASDAQ: PANW) stock, one of the nation's biggest cybersecurity companies, fell an unlucky 7% through 9:55 a.m. ET Friday.
What's up with Palo Alto going down? It seems artificial intelligence company Anthropic has a new model coming out soon, "Claude Mythos," and it's bad news for cyber companies like Palo Alto.
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(Almost) introducing Claude Mythos
Claude Mythos has not been released yet, but as StreetInsider.com reports, someone (or someones) found details about the new model in a draft of an upcoming blog stored in a searchable database. According to the draft blog, Anthropic is working on new "Capybara" AI models that improve its existing top-tier "Opus" models -- and Claude Mythos is a code name or subset for one of these Capybara models.
Quoting from the document, StreetInsider says Claude Mythos is "by far the most powerful AI model we've ever developed," and particularly powerful in reasoning, coding, and also cybersecurity functions.
What it means for Palo Alto Networks
And this seems to be the crux of the issue: Investors are worried that if Anthropic has developed an AI model that's potentially better than Palo Alto's own cybersecurity tools, it might steal market share from Palo Alto. Is this a valid concern?
Who knows!? Claude Mythos hasn't been released yet. All we know of it is what someone read in an unfinished blog. Investors, though, are jumpy and more than willing to sell first and ask questions later. Ordinarily, I'd criticize this reaction, but with Palo Alto Networks stock trading at 35 times trailing free cash flow and 90 times earnings, there's really not much margin of safety in this stock.
Selling on the rumor, even if it's untrue, might actually be the right call here.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
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