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Growing Need for Cybersecurity Puts These ETFs in Focus
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Increasing adoption of Artificial Intelligence (AI) in day-to-day activities of businesses poses great benefits to operations by increasing efficiency but at the same time making companies more vulnerable to cyber attacks.
As businesses increasingly transition their operations online, the threat of disruptions posed by malware attacks and ransomware becomes increasingly evident, highlighting the growing importance of cybersecurity.In today's landscape, cybersecurity serves a dual purpose: protecting organizations from cyber threats while helping them seamlessly transition to a wider online presence.
As digitalization grows globally and businesses use innovation to expand their technical capabilities, cybersecurity will remain a wise investment for both companies and investors in the long run.
Companies Increase Expenditure on Cybersecurity
According to Matthew Ball, Chief Analyst at Canalys, as quoted on Canalys, the number of publicly reported ransomware attacks has surged by over 50%, with breached data records more than doubling in the first eight months of this year, indicating that 2023 is the worst documented year, ahead of 2021.
Per Gartner, according to Investor’s Business Daily, corporate expenditure on cybersecurity is forecast to reach a valuation of $215 billion by 2024, witnessing a 14% rise. Earlier, the research firm had estimated 11% growth but revised its forecast upward, driven by increasing ransomware attacks by developments in generative AI.
Rising Geopolitical Tensions Drive Cyberattacks
The growing Middle East crisis, particularly between Israel and Gaza has brought cybersecurity under the spotlight. The country is currently dealing with a wave of assaults from hacking groups linked to Russia, Hamas, and other countries. According to Reuters, Israeli cybersecurity experts are offering free services to local companies amid a rise in hacktivist attacks linked to the Gaza conflict.
The increasing use of attacks by hacktivist groups underscores the need for more robust cybersecurity measures, especially given how conflicts are being brought online by the use of digital tools. As per Reuters, analysts are increasingly anticipating a drastic cyberespionage activity behind the scenes concerning the conflicts in middle Asia.
This highlights the urgency for a global unified stand on cybersecurity by governments and companies ascyberthreats evolve and get more complicated.
Government Initiatives in Cybersecurity
New cybersecurity disclosure requirements by the SEC, makes it the latest regulatory agency to put emphasis on scrutiny of cybersecurity practices within U.S. companies. This move encourages boards and executive management teams to prioritize their cyber risk management efforts, requiring them to disclose cyber incidents within four days after confirming their materiality. This measure by the regulatory body will encourage more corporate spending in the domain, a tailwind for the cybersecurity market.
According to Nasdaq, SEC requires companies to file an 8-K including the nature, scope, timing and materiality of the event.The SEC recognized the rising costs and adverse consequences of cybersecurity issues for publicly traded companies and the overall economy. This awareness increased investor demand for more rapid and consistent cybersecurity disclosures.
In a bid to meet the additional new requirements, companies will have to increase the investment on upgrading their cybersecurity function and preventing any concern regarding cybersecurity.Moody's supports this view, as quoted on Nasdaq, stating that the SEC's disclosure changes will have a positive credit impact, as the rule may incentivize investments in stronger cybersecurity defenses.
ETFs in Focus
According to Tina Chang, CEO of SysLogic, Inc., as quoted on GlobeNewswire, cybercrime took center stage as a growing global concern, with costs estimated to surpass a staggering $8 trillion mark. The increasing threat of cyber attacks and the incorporation of AI in everyday business operations, underscores the need for more investments in cybersecurity domain.
Even with other headwinds like high interest rates, stubborn inflation levels and increasing geopolitical concerns inflicting volatility in the broader market, the cybersecurity space remains promising. Investors with a long-term horizon can capitalize on increasing investments in the sector.
Below, we highlight a few ETFs for investors to tap into the promising sector.
First Trust NASDAQ Cybersecurity ETF seeks to track the performance of the Nasdaq CTA Cybersecurity Index with a basket of 33 securities. The fund has amassed an asset base of $5.09 billion and charges an annual fee of 0.60%.
First Trust NASDAQ Cybersecurity ETF has gained 18.86% over the past year and 0.19% over the past month (as of Oct 18).
ETFMG Prime Cyber Security ETFMG Prime Cyber Security Fund (HACK - Free Report)
ETFMG Prime Cyber Security ETFMG Prime Cyber Security Fund seeks to track the performance of the Prime Cyber Defense Index with a basket of 50 securities. The fund has gathered an asset base of $1.47 billion and charges an annual fee of 0.60%.
ETFMG Prime Cyber Security ETFMG Prime Cyber Security Fund has gained 20.61% over the past year and 2.21% over the past month (as of Oct 18).
iShares Cybersecurity & Tech ETF seeks to track the performance of the NYSE FactSet Global Cyber Security Index with a basket of 36 securities. The fund has amassed as asset base of $600 million and charges an annual fee of 0.47%.
iShares Cybersecurity & Tech ETF has gained 15% over the past year but lost around 0.56% over the past month (as of Oct 18).
Global X Cybersecurity ETF seeks to track the performance of the Indxx Cybersecurity Index with a basket of 23 securities. The fund has gathered an asset base of $599 million and charges an annual fee of 0.51%.
Global X Cybersecurity ETF has gained 3.63% over the past year but lost 1.25% over the past month (as of Oct 18).
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Growing Need for Cybersecurity Puts These ETFs in Focus
Increasing adoption of Artificial Intelligence (AI) in day-to-day activities of businesses poses great benefits to operations by increasing efficiency but at the same time making companies more vulnerable to cyber attacks.
As businesses increasingly transition their operations online, the threat of disruptions posed by malware attacks and ransomware becomes increasingly evident, highlighting the growing importance of cybersecurity.In today's landscape, cybersecurity serves a dual purpose: protecting organizations from cyber threats while helping them seamlessly transition to a wider online presence.
As digitalization grows globally and businesses use innovation to expand their technical capabilities, cybersecurity will remain a wise investment for both companies and investors in the long run.
Companies Increase Expenditure on Cybersecurity
According to Matthew Ball, Chief Analyst at Canalys, as quoted on Canalys, the number of publicly reported ransomware attacks has surged by over 50%, with breached data records more than doubling in the first eight months of this year, indicating that 2023 is the worst documented year, ahead of 2021.
Per Gartner, according to Investor’s Business Daily, corporate expenditure on cybersecurity is forecast to reach a valuation of $215 billion by 2024, witnessing a 14% rise. Earlier, the research firm had estimated 11% growth but revised its forecast upward, driven by increasing ransomware attacks by developments in generative AI.
Rising Geopolitical Tensions Drive Cyberattacks
The growing Middle East crisis, particularly between Israel and Gaza has brought cybersecurity under the spotlight. The country is currently dealing with a wave of assaults from hacking groups linked to Russia, Hamas, and other countries. According to Reuters, Israeli cybersecurity experts are offering free services to local companies amid a rise in hacktivist attacks linked to the Gaza conflict.
The increasing use of attacks by hacktivist groups underscores the need for more robust cybersecurity measures, especially given how conflicts are being brought online by the use of digital tools. As per Reuters, analysts are increasingly anticipating a drastic cyberespionage activity behind the scenes concerning the conflicts in middle Asia.
This highlights the urgency for a global unified stand on cybersecurity by governments and companies ascyberthreats evolve and get more complicated.
Government Initiatives in Cybersecurity
New cybersecurity disclosure requirements by the SEC, makes it the latest regulatory agency to put emphasis on scrutiny of cybersecurity practices within U.S. companies. This move encourages boards and executive management teams to prioritize their cyber risk management efforts, requiring them to disclose cyber incidents within four days after confirming their materiality. This measure by the regulatory body will encourage more corporate spending in the domain, a tailwind for the cybersecurity market.
According to Nasdaq, SEC requires companies to file an 8-K including the nature, scope, timing and materiality of the event.The SEC recognized the rising costs and adverse consequences of cybersecurity issues for publicly traded companies and the overall economy. This awareness increased investor demand for more rapid and consistent cybersecurity disclosures.
In a bid to meet the additional new requirements, companies will have to increase the investment on upgrading their cybersecurity function and preventing any concern regarding cybersecurity.Moody's supports this view, as quoted on Nasdaq, stating that the SEC's disclosure changes will have a positive credit impact, as the rule may incentivize investments in stronger cybersecurity defenses.
ETFs in Focus
According to Tina Chang, CEO of SysLogic, Inc., as quoted on GlobeNewswire, cybercrime took center stage as a growing global concern, with costs estimated to surpass a staggering $8 trillion mark. The increasing threat of cyber attacks and the incorporation of AI in everyday business operations, underscores the need for more investments in cybersecurity domain.
Even with other headwinds like high interest rates, stubborn inflation levels and increasing geopolitical concerns inflicting volatility in the broader market, the cybersecurity space remains promising. Investors with a long-term horizon can capitalize on increasing investments in the sector.
Below, we highlight a few ETFs for investors to tap into the promising sector.
First Trust NASDAQ Cybersecurity ETF (CIBR - Free Report)
First Trust NASDAQ Cybersecurity ETF seeks to track the performance of the Nasdaq CTA Cybersecurity Index with a basket of 33 securities. The fund has amassed an asset base of $5.09 billion and charges an annual fee of 0.60%.
First Trust NASDAQ Cybersecurity ETF has gained 18.86% over the past year and 0.19% over the past month (as of Oct 18).
ETFMG Prime Cyber Security ETFMG Prime Cyber Security Fund (HACK - Free Report)
ETFMG Prime Cyber Security ETFMG Prime Cyber Security Fund seeks to track the performance of the Prime Cyber Defense Index with a basket of 50 securities. The fund has gathered an asset base of $1.47 billion and charges an annual fee of 0.60%.
ETFMG Prime Cyber Security ETFMG Prime Cyber Security Fund has gained 20.61% over the past year and 2.21% over the past month (as of Oct 18).
iShares Cybersecurity & Tech ETF (IHAK - Free Report)
iShares Cybersecurity & Tech ETF seeks to track the performance of the NYSE FactSet Global Cyber Security Index with a basket of 36 securities. The fund has amassed as asset base of $600 million and charges an annual fee of 0.47%.
iShares Cybersecurity & Tech ETF has gained 15% over the past year but lost around 0.56% over the past month (as of Oct 18).
Global X Cybersecurity ETF (BUG - Free Report)
Global X Cybersecurity ETF seeks to track the performance of the Indxx Cybersecurity Index with a basket of 23 securities. The fund has gathered an asset base of $599 million and charges an annual fee of 0.51%.
Global X Cybersecurity ETF has gained 3.63% over the past year but lost 1.25% over the past month (as of Oct 18).