Cloudflare (NET) Surges 2.88% on AI Security Breakthrough: Is This the Catalyst for a New Bull Run?

Summary
• Cloudflare (NET) surges 2.88% to $204.27, breaking above its 52-week high of $219
• Intraday high of $205.65 and low of $199.76 highlight volatile momentum
• New AI security integrations with ChatGPT, Claude, and Google Gemini drive institutional buying
• Options chain shows heavy call buying at 205–207.5 strikes with leverage ratios exceeding 35%

Cloudflare’s stock is surging on a groundbreaking move to secure generative AI tools for enterprises. With the price climbing above $204, the stock’s 3.1% rally reflects investor enthusiasm for its CASB integrations and a bullish technical setup. The move aligns with a broader market focus on AI-driven security solutions, positioning Cloudflare at the forefront of a critical tech trend.
AI Security Integrations Ignite Investor Optimism
Cloudflare’s announcement of direct integrations with ChatGPT Enterprise, Claude, and Google Gemini has positioned it as the first CASB to offer real-time visibility and control over enterprise AI usage. This innovation addresses a critical pain point for businesses adopting generative AI tools, where data leakage and compliance risks are rampant. The news coincides with a surge in enterprise AI adoption, with three-quarters of employees now using such tools. By scanning these platforms for sensitive data and providing proactive alerts, Cloudflare is solving a market need that justifies the stock’s sharp intraday rally.

Software—Infrastructure Sector Gains Momentum as ZS Rises 1.92%
The Software—Infrastructure sector is showing strength, with Zscaler (ZS) up 1.36% on the day. Cloudflare’s rally outpaces its sector leader, reflecting its unique positioning in AI security. While ZS focuses on cloud security postures, Cloudflare’s CASB integrations directly address AI-specific risks, making it a standout performer in a sector increasingly driven by AI-driven innovation.

Options and ETFs to Capitalize on Cloudflare’s Bullish Momentum
• 200-day average: $143.91 (well below current price)
• RSI: 31.31 (oversold territory)
• MACD: 0.595 (bullish divergence from signal line at 1.98)
• Bollinger Bands: Price at $204.71, near upper band of $213.68

Cloudflare’s technicals suggest a continuation of its bullish trend. The stock is trading above its 30D MA ($199.17) and 100D MA ($166.15), with RSI indicating oversold conditions. Key support lies at $199.17 (30D MA), while resistance is at $213.68 (Bollinger upper band). The 2025-09-05 options chain shows heavy call buying at 205–207.5 strikes, with leverage ratios exceeding 35% and high gamma/theta values. For ETFs, the Kurv Yield Premium Strategy NFLX ETF (NFLP) and Direxion Daily NFLX Bull 2X Shares (NFXL) offer leveraged exposure to the broader tech rally, though NFLP’s 0.13% gain contrasts with NFXL’s -0.19% decline.

Top Options Picks:
• NET20250905C205
- Type: Call
- Strike: $205
- Expiration: 2025-09-05
- IV: 42.81% (moderate)
- Leverage Ratio: 35.66% (high)
- Delta: 0.51 (moderate sensitivity)
- Theta: -0.71 (high time decay)
- Gamma: 0.0275 (high sensitivity to price changes)
- Turnover: 52,621 (liquid)
- Payoff at 5% Upside: $204.71 → $215.00 → $10.00 profit per contract
- Why: High leverage and gamma make this ideal for a continuation of the rally.
• NET20250905C207.5
- Type: Call
- Strike: $207.5
- Expiration: 2025-09-05
- IV: 42.75% (moderate)
- Leverage Ratio: 44.40% (very high)
- Delta: 0.44 (moderate sensitivity)
- Theta: -0.65 (high time decay)
- Gamma: 0.0273 (high sensitivity to price changes)
- Turnover: 24,716 (liquid)
- Payoff at 5% Upside: $204.71 → $215.00 → $7.50 profit per contract
- Why: Aggressive play with high leverage for a breakout above $207.50.

Action: Aggressive bulls may consider NET20250905C205 into a bounce above $205 or NET20250905C207.5 for a high-leverage bet on a sustained rally.

Backtest Cloudflare Stock Performance
The strategy of buying NET after an intraday increase of 3% resulted in a 69.82% return, significantly underperforming the benchmark return of 84.63%. The strategy's CAGR was 11.38%, with a maximum drawdown of 0.00% and a Sharpe ratio of 0.55, indicating a low risk-adjusted return and consistent performance.

Cloudflare’s AI Security Edge: A Catalyst for Sustained Gains
Cloudflare’s integration with leading AI tools positions it as a critical player in the enterprise security landscape, with technicals and options activity reinforcing a bullish outlook. The stock’s 3.1% intraday surge reflects strong demand for its solutions, while the sector leader ZS (Zscaler) rises 1.36%, signaling broader industry momentum. Investors should monitor the $205–207.5 resistance levels and watch for a breakout to confirm the trend. For now, the 2025-09-05 options chain and leveraged ETFs like NFLP offer strategic entry points to capitalize on this AI-driven rally. Watch for $205 breakout or sector leader ZS’s momentum to validate the trend.