Why Cybersecurity ETFs Deserve a Spot in Your Portfolio

As the adoption of AI technology accelerates, the need for cybersecurity becomes increasingly evident, with cybercrime evolving into a global crisis. Cyberattacks are on the rise as an increasing number of companies across various sectors are integrating generative AI into their daily operations, making companies more vulnerable to cyberattacks.

As corporate investments in AI continue to rise, a correlated and inevitable increase in cybersecurity spending is becoming evident.

The Case for Increased Cybersecurity Investment

Increased cyber-attacks on crucial sectors, like healthcare, utilities and finance, have the potential to disrupt the economic stability of the broader economy. The recent ransomware attack on Kettering Health, a network of 14 medical centers serving a large portion of Ohio, highlights the vulnerability of critical infrastructure to cyberattacks.

The U.S. healthcare sector has long been a prime target for cybercriminals, who have often exploited the urgency of patient care to demand payment. According to CNN, the sector reported more than 440 ransomware attacks and data breaches to the FBI last year, more than any other critical infrastructure sector.

In today's landscape, increasing cybersecurity spending is vital. Any setbacks to critical infrastructure could have severe consequences for the economy, making robust cybersecurity measures an essential investment.

The Business Impact of Rising Cyber Attacks

The dependency of companies on the digital landscape, driven by the rise of e-commerce and growing consumer reliance on online marketplaces, has increased companies' vulnerability to cyber threats.

The Marks & Spencer cyberattack is just one example in a growing list of breaches. According to BBC, having fallen victim to a significant ransomware attack that began over Easter, the retail company halted taking online orders in late April, with the disruption expected to continue until July. Marks and Spencer confirmed that some customer data was compromised.

The financial fallout from the cyberattack is drastic, with the company reporting an estimated loss of £300 million, amounting to a staggering 30% reduction in profits, as quoted on BBC. Since the incident, the share price of the company has taken a hit, erasing over half a billion pounds off its market value.

Companies are not only vulnerable to financial losses from cyberattacks but also risk serious reputational damage, especially when customer data security is compromised.

Escalation of Geopolitical Cyber Attacks

Growing geopolitical crises has brought cybersecurity under the spotlight. The increasing use of attacks by hackers underscores the need for more robust cybersecurity measures, especially given the growing reliance on digital infrastructure within defense systems and the shift of global conflict to a new digital front.

Story ContinuesAccording to Globe News Wire, as the complexity of warfare in the digital domain continues to evolve, investment in military-grade cybersecurity solutions has become strategically imperative. This trend can be highlighted by the use of cyberattacks in recent geopolitical conflicts, such as those between India-Pakistan and Russia-Ukraine.

Cybersecurity is becoming a cornerstone of modern defense strategies, with the global military cybersecurity market poised for substantial growth between 2025 and 2034. In the same period, the market is projected to witness a CAGR of 7.5%, reaching a valuation of $52 billion by 2034.

ETFs to Consider

The need for companies to invest in cybersecurity remains constant, regardless of market conditions.

The cybersecurity space remains promising, anticipated to witness a CAGR of 14.3% from 2024 to 2032, reaching a valuation of $562.72 billion in 2032, according to Fortune Business Insights. 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, Amplify Cybersecurity ETF HACK, iShares Cybersecurity & Tech ETF IHAK, Global X Cybersecurity ETF BUG, WisdomTree Cybersecurity Fund WCBR and Themes Cybersecurity ETF SPAM can be considered.

With a one-month average trading volume of about 874,000 shares, CIBR is the most liquid option, offering investors easier entry and exit while minimizing the risk of significant price fluctuations, ideal for active trading strategies.

URA has also gathered an asset base of $9.26 billion, having the largest asset base among the other options. Regarding charging annual fees, charging 0.35%, SPAM is the cheapest option and is more suitable for long-term investing.

Performance-wise, CIBR outpaced other funds significantly, gaining 23.52% over the past year, with HACK coming in second, adding 21.08% over the past year. Over the past month, performance across the funds has remained fairly consistent, ranging from 3.5% to 5.5%.

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Amplify Cybersecurity ETF (HACK): ETF Research Reports

First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports

iShares Cybersecurity and Tech ETF (IHAK): ETF Research Reports

Global X Cybersecurity ETF (BUG): ETF Research Reports

WisdomTree Cybersecurity Fund (WCBR): ETF Research Reports

Themes Cybersecurity ETF (SPAM): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

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