What Happened?
Shares of cloud security platform Zscaler (NASDAQ: ZS) fell 10.7% in the afternoon session after the White House announced plans to raise global tariffs to 15%.
The major stock indexes, including the S&P 500 and Nasdaq, also sank amid the uncertainty. The downturn came after President Trump announced the tariff increase in a post on Truth Social, stating the new rate would be effective immediately on countries that had been, in his words, "'ripping' the U.S. off for decades." The move sparked concern among trade partners, with Europe warning that such tariffs could put U.S. trade deals at risk. The market-wide slide reflected investor worries about the potential impact of these new global trade policies Additionally, investor concerns about disruption in the software industry from advancements in artificial intelligence (AI) continued to cause a sector-wide sell-off. The market started the week with a more cautious tone, reflecting this unease. The current wave of AI development was seen as having similar traits to previous tech cycles, marked by genuine innovation but also by exuberant expectations and sharp market reactions to new developments.
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What Is The Market Telling Us
Zscaler’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. But moves this big are rare even for Zscaler and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 3.8% on the news that Anthropic unveiled Claude Code Security, a tool designed to autonomously scan codebases for vulnerabilities and suggest targeted software patches. Historically, cybersecurity value was tied to human-intensive monitoring and proprietary software moats. However, Claude Code's ability to autonomously write, test, and refactor production-grade code, as well as its documented role in the first large-scale, AI-orchestrated cyberattack shifted market sentiment. The market's reaction was further driven by fear that AI is shifting from a supportive "copilot" to a direct substitute for high-margin, specialized security software. As a result, investors are increasingly skeptical of the long-term pricing power of legacy firms if "good enough" security remediation can be embedded directly into the development workflow by an AI agent.
Zscaler is down 35.5% since the beginning of the year, and at $142.35 per share, it is trading 57.7% below its 52-week high of $336.27 from November 2025. Investors who bought $1,000 worth of Zscaler’s shares 5 years ago would now be looking at an investment worth $689.31.
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