The landscape for artificial intelligence (AI) investments is rapidly evolving, and the spotlight is gradually shifting from established giants like Nvidia (NVDA) to emerging players in the sector. As we delve into 2025, Zscaler (ZS), a cloud-based cybersecurity firm, has gained notable traction, outperforming Nvidia in the stock market with a staggering 59% increase in stock price this year.
### Nvidia’s Growth Story and Recent Challenges
Nvidia has long been a frontrunner in AI technology, largely thanks to its cutting-edge graphics processing units (GPUs), which are indispensable in training various AI models. However, despite Nvidia’s solid growth indicators, its stock has only appreciated by 32% in 2025. This tempered performance is attributed to significant external factors, including restrictions on chip sales to China and looming tariffs that could undermine its profit margins.
Investors are now on the lookout for alternative AI stocks that may provide a more lucrative investment opportunity, particularly as the rapid adoption of AI becomes more entrenched in various sectors.
### Zscaler’s Strong Position
Zscaler stands out in this context due to its strategic focus on zero-trust security solutions. The zero-trust security market is anticipated to grow at nearly 17% annually, potentially generating over $92 billion in revenue by the end of the decade. Additionally, Zscaler has managed to exceed this market’s growth rate, achieving a 23% uptick in revenue, bringing it up to $2.7 billion in the recent fiscal year ending July 31, 2025.
The company’s innovative approach is noteworthy; it specializes in providing cybersecurity tools tailored for AI applications. Its efforts in creating solutions to secure access for AI applications and protect large language models (LLMs) position it well for future growth.
Zscaler has also introduced agentic AI cybersecurity solutions, which enhance user experience by expediting the identification of IT outages and improving troubleshooting processes. This sector is projected to grow at an impressive compound annual growth rate (CAGR) of 34%, potentially reaching $322 billion by 2033. Zscaler’s commitment to developing these solutions bodes well for its long-term revenues.
### Robust Revenue Pipeline
One key indicator of Zscaler’s growth potential is its remaining performance obligations (RPO), which spiked by 31% to $5.8 billion last quarter. This figure is more than double its revenue from the previous year, suggesting that Zscaler is acquiring business at a pace that outstrips its ability to fulfill demand immediately. Usually, a growing RPO can be a strong predictor of future revenue; thus, Zscaler’s increasing RPO implies a robust pipeline for sustained growth.
### Analyst Expectations and Market Valuation
Despite expectations for strong double-digit growth in the coming fiscal years, market analysts believe that Zscaler might not maintain the same rapid growth it experienced in fiscal 2025. However, recent positive shifts in revenue estimates, supported by improvements in RPO, indicate that Zscaler could continue to surpass Wall Street’s predictions.
Currently, Zscaler is priced at 16 times its sales, which, while on the higher end compared to a sector average of 8.5, pales in comparison to Nvidia’s staggering price-to-sales ratio of 25. Moreover, Zscaler’s long-term growth prospects, especially in AI-focused cybersecurity niches, are anticipated to outpace those of Nvidia as the latter’s growth might slow down due to a massive revenue base.
### Final Thoughts
For investors seeking a compelling AI stock with potential for significant long-term gains, Zscaler presents a well-rounded option, especially after its impressive performance this year. While Nvidia remains a formidable player in the AI field, emerging challenges and market conditions may limit its growth potential moving forward.
Zscaler, with its commitment to cybersecurity solutions and its focus on AI application protection, could emerge as a leader in segments that are crucial for the digital age. Investing in Zscaler now, while it’s still comparatively undervalued relative to Nvidia, could be a strategic decision for those looking to capitalize on the ongoing growth within the AI landscape.
### Conclusion
In summary, as AI continues to revolutionize various industries, Zscaler’s value proposition as a cybersecurity specialist positions it for tremendous growth. Investors who choose to align themselves with Zscaler may find themselves well-positioned to reap the benefits of an expanding market that prioritizes security and innovation in AI applications.
As we progress through 2025, maintaining a portfolio that recognizes the shifting dynamics between established players like Nvidia and emerging competitors like Zscaler could prove invaluable. The cybersecurity company’s proactive strategies and innovations could indeed lead it on a path to outperform in the thriving AI market.
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