ETFs
Cybersecurity ETFs in the spotlight amid growing cyber threats – May 30, 2024
The increasing adoption of artificial intelligence (AI) in daily business operations presents great benefits to operations by increasing efficiency while making businesses more vulnerable to cyberattacks.
As businesses increasingly move their operations online, the threat of disruption posed by malware and ransomware attacks becomes evident, highlighting the growing need for cybersecurity.
In today’s landscape, cybersecurity serves a dual purpose: protecting organizations from cyber threats while helping them seamlessly transition to a broader online presence. Faced with the evolving and asymmetric characteristics of space, continued investment in cybersecurity becomes essential.
Why businesses should increase their cybersecurity spending
According to the IMF, since the pandemic, businesses have witnessed a two-fold increase in cyberattacks, with a growing threat of significant financial losses. Losses from cyberattacks increased significantly compared to 2017, quadrupling to approximately $2.5 billion. Additionally, indirect impacts, such as reputational damage and increased security spending, create more problems for organizations.
Given the widespread impact of globalization and interdependence among sectors, the growing threat to different sectors is becoming a source of concern, especially that to the financial sector. The increase in cyberattacks against the financial sector has the potential to disrupt the financial and economic stability of other sectors, the effects of which could ripple into a global event.
Additionally, businesses’ reliance on the digital landscape post-pandemic increases their vulnerability. Digital technology has connected people at unprecedented scale and speed, while enabling cyberattacks, making them more aggressive in frequency and complexity.
Emergence of Deepfake as a new threat
A deepfake refers to a digitally altered video, audio, or image of a real individual, usually manipulated using artificial intelligence techniques, to portray them in a deceptive manner.
According to CNBC, the surge in threats to businesses from deepfake scams, resulting in multimillion-dollar losses, is only expected to get worse as criminals exploit generative AI for fraudulent purposes. As AI technology advances, the scale and complexity of these scams have increased exponentially, which only highlights the growing need for increased investment in this area.
According to Jason Hogg, cybersecurity expert and executive in residence at Great Hill Partners, quoted on CNBC, deepfakes of top company executives can be generated to spread misleading information to manipulate stock prices, impacting the reputation of companies and is detrimental to their stock prices.
Escalation of geopolitical cyberattacks
The growing crisis in the Middle East, particularly between Israel and Gaza, has put cybersecurity in the spotlight. The growing reliance on hacker attacks highlights the need for more robust cybersecurity measures, particularly given how conflicts are being brought online through the use of digital tools.
According to S&P Global, the increase in ransomware attacks also poses a significant threat. These attacks usually start with phishing, exploiting vulnerable software or computer configuration errors. Once the attacker controls the initial system, they can spread across the network, disable it, and demand a ransom for a decryption key to unlock the files.
Critical national infrastructure (CNI), such as the maritime industry and nuclear power plants, have also faced increased threats of cyberattacks in recent years. This highlights the urgency of a unified global position on cybersecurity from governments and businesses, as cyber threats evolve and become more complex.
Focus on ETFs
The growing threat of cyberattacks and the integration of AI into daily business operations highlight the need for greater investment in the area of cybersecurity.
The cybersecurity sector remains promising, growing at a CAGR of 13.8% between 2023 and 2030, reaching a valuation of $424.97 billion in 2023. according to Fortune Business Insights. Investors with a long-term horizon can capitalize on the increased investment in the sector.
Below, we highlight a few ETFs for investors to tap into this promising sector.
NASDAQ First Trust Cybersecurity ETF (CIBR – Free report) has gained 36.42% over the past year.
Amplify Cybersecurity ETF (TO HACK – Free report) has gained 37.44% over the past year.
iShares Cybersecurity and Technology ETF (IHAK – Free report) has gained 31.94% over the past year.
Global X Cybersecurity ETF (BUG – Free report) has gained 31.66% over the past year.
WisdomTree Cybersecurity Fund (WCBR – Free report) has gained 47.28% over the past year.
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