Cyber Stocks Take the Lead From Semiconductors in May

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•  22 May 2026
 

First Trust Nasdaq Cybersecurity ETF has risen more than 20% in May, outpacing both the iShares Semiconductor ETF and the iShares Expanded Tech-Software Sector ETF, representing one of the cleaner sector rotation signals in the technology trade this year. The fund broke above resistance levels that had capped it since October, posting a series of intraday all-time highs in the process. This earnings momentum within cybersecurity is shifting at least a portion of institutional flows away from the semiconductor names that dominated the year-to-date narrative. The broader technology rally on Wall Street remains heavily anchored in chips, but May belongs to a different sector.

The structural reason behind the move is how the market now defines cybersecurity. Information security is no longer a narrow enterprise software category but an embedded requirement across cloud infrastructure, AI buildout, communications networks, and enterprise automation at scale. As corporate capital expenditure on digitization and automation expands, the protection layer scales alongside it, creating a demand profile that is increasingly difficult to separate from the core AI infrastructure trade. CIBR reflects this evolution directly, with major holdings including Cisco, Alphabet, and Broadcom alongside pure-play security names, giving the fund exposure to networking, cloud, and semiconductor infrastructure in addition to traditional cybersecurity.

The rally is not concentrated in a single name, which strengthens its credibility as a sector-wide move rather than a momentum spike in one stock. CrowdStrike continues to set intraday highs, while Palo Alto Networks and Datadog recently crossed their own prior peak levels. CrowdStrike, Palo Alto, Datadog, Fortinet, and Cisco collectively added tens of billions of dollars in combined market capitalization during May alone. That breadth of multiple expansion across the sector suggests institutional positioning rather than retail-driven concentration.

Not every cybersecurity name is participating equally, and those distinctions carry positioning implications. Zscaler and Okta are recovering but remain well below their prior highs, while Dynatrace lags the broader sector move and Check Point sits further behind still. The market is differentiating on the basis of growth consistency, demand visibility, and the ability to integrate into modern enterprise infrastructure stacks. Even a roughly 24% single-session drop in Cloudflare earlier in the month failed to interrupt the broader buying pattern in the sector.

Semiconductor stocks retain their position as the central pillar of the technology market and their year-to-date returns remain substantial. The question the current rotation raises is whether cybersecurity is capturing a short-term reallocation from investors rotating within technology, or whether it is establishing a more durable leadership role in the AI and digital infrastructure cycle. The answer likely depends on whether the largest names in the sector can sustain revenue growth rates that justify the capital now moving in their direction.

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