The cybersecurity space has outperformed the broader tech space in the past month despite rising rate worries. The broader market tech ETF Technology Select Sector SPDR Fund (XLK - Free Report) has added 1.6% past month while WisdomTree Cybersecurity Fund (CIBR - Free Report) is up 3.7% past month (as of Sep 14, 2023). Let’s find out the reason behind the surge.

Cybersecurity Companies Shine in Q2 Earnings

The second-quarter earnings season proved victorious for cybersecurity companies, as they outperformed Wall Street expectations and witnessed substantial share price increases of 10% or more. In contrast, mega-cap tech stocks displayed mixed results, and retailers expressed concerns regarding in-store theft. The cybersecurity sector, however, achieved consistent success due to the growing demand for its offerings.

Cybersecurity's Remarkable Growth

Amid the earnings season, it is evident that cybersecurity is currently one of the fastest-growing segments in technology. Consulting firm McKinsey & Co. predicts a staggering $2 trillion market for cybersecurity, reflecting the increasing reliance of businesses and individuals worldwide on sophisticated solutions to safeguard themselves from cyberattacks, identity theft and the management of electronic device access, as quoted on

Notably, cybersecurity has transitioned from an optional expense to a crucial business necessity, ensuring that spending in this sector is poised for continuous growth in the upcoming years. This is especially true, given the fast increase of cyberattacks.

Global cyberattacks increased 38% year over year in 2022, according to Check Point Research, quoted on a source. Healthcare facilities in the United States alone saw an average of 1,410 weekly cyberattacks per organization in 2022, marking an 86% increase from the previous year.

Cybersecurity ETFs Set to Gain From AI's Usage in Scams

Artificial Intelligence (AI) is a double-edged sword for cybersecurity. For example, a key talking point at the RSA Conference 2023, as cited on, was the multifaceted impact of OpenAI's GPT-4 on cybersecurity. The conference's speakers explored the potential surge in code reuse and attacks with the help of ChatGPT.

While some industry experts noted that AI’s positive applications in enhancing cybersecurity measures, it's undeniable that the language model has introduced novel cybersecurity threats, including disinformation generation and designing social engineering attacks.

Haywood Talcove, CEO of LexisNexis Risk Solutions, labels this new age of fraud as "crime 3.0", where advanced technologies have the potential to bypass conventional security measures, as quoted on Yahoo Finance (read: Cybersecurity ETFs Set to Gain from AI's Usage in Scams).

ETFs in Focus

Against this backdrop, below we have highlighted a few cybersecurity ETFs that have surged in the past month.

WisdomTree Cybersecurity Fund (WCBR - Free Report) – Up 7.8%

ProShares Ultra Nasdaq Cybersecurity ETF (UCYB - Free Report) – Up 6.2%

Global X Cybersecurity ETF(BUG - Free Report) – Up 5.4%

First Trust NASDAQ Cybersecurity ETF (CIBR - Free Report) – Up 3.7%

ETFMG Prime Cyber Security ETFMG Prime Cyber Security Fund (HACK - Free Report) – Up 3.4%

iShares Cybersecurity & Tech ETF (IHAK - Free Report) – Up 3.8%

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