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As discussed in our 2024 outlook published in January (2024: The Start of a Rate Easing Cycle), we believe the cybersecurity industry will have many years of growth that will significantly outgrow general GDP growth. Furthermore, the sector is quite diversified in terms of investment opportunities, and the cybersecurity equities universe offers a combination of growth, profitability and high level of recurring revenues.

Cybersecurity Industry: Medium Term Growth Drivers

The main growth driver for the cybersecurity industry is the ongoing rise of cybersecurity threats. The rise of cybersecurity threats is basically the flip side of the digital transformation and technological advancement we’re experiencing at a high pace in recent years.

Governments, corporates and individuals are constantly becoming more reliant on digital and technological services, increasing the scope and vulnerability to cybersecurity threats.

Adoption of cloud services and emerging technologies such as AI, machine learning and blockchain constantly expose us to new security vulnerabilities requiring advanced cybersecurity solutions. This is evident also with the increasing sophistication of cyber attacks constantly introducing new shapes and forms as ransomware, phishing and the ever evolving Advanced Persistent Threats (APTs).

In recent years, mainly boosted in Covid times, we’ve seen increasing adoption of remote working. This created a new challenge for corporations to protect their data and systems.

Regulation is also an important growth driver for the space. The enforcement of data protection rules requires corporations to invest heavily in protecting data. Examples include the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA).

Supply chain vulnerability, exposed in recent years via cyber attacks aimed to disrupt the function of an overall supply chain are also contributing to the need and increased sophistication of cybersecurity solutions.

Cyber use in warfare and cyber attacks on physical targets is constantly on the rise. For example in recent years cyber criminals have increased their attacks on essential targets such as oil and gas, water and mining sectors. Recent examples include the 2021 ransomware attack that shut down America’s Colonial Pipeline and a $50mn ransom demand from oil group Saudi Aramco due to data leak.

The above mentioned implies that the demand for cybersecurity solutions will continue to grow strongly in the coming years.

Security Spending is Increasing

Cybersecurity: Recommended AI Portfolio

The Bridgewise Cybersecurity portfolio was constructed by applying the algorithm on the cybersecurity equities universe and choosing the best performing portfolio based on a five year back testing period.

The portfolio comprises 30 names, achieving diversification in terms of market cap and growth phase. For example, the highest market cap in the portfolio is Cisco with a value of $195 billion and the lowest market cap in the portfolio is Openspan with a market cap of $378 million, demonstrating the strong diversification qualities of the portfolio.

5 Cybersecurity Highlights

CrowdStrike, CyberArk Software, Zscaler, Check Point Software and Palo Alto Networks. These are leading companies in the cybersecurity industry, offering advanced solutions to combat cyber threats.

CrowdStrike

With its proprietary technology, CrowdStrike Falcon, the company offers endpoint security, threat intelligence and incident response services. The company developed and advanced AI-driven threat detection capabilities.

CyberArk Software

The company specializes in protecting against cyber threats that involve privileged access and accounts. Privileged accounts are often targeted by attackers to gain deep access to critical systems and data. CyberArk's services offer enterprises to safeguard their most sensitive information.

Zscaler

The company is famous for its cloud-native security platform that securely connects users to their applications, regardless of device, location or network. Their services enable users to transition safely and efficiently to the cloud while protecting against cyber threats.

Check Point Software

A veteran company in the cybersecurity space, providing solutions for network security, endpoint protection, cloud security and more.

Palo Alto Networks

Their approach includes advanced firewalls and cloud-based offerings that extend to every corner of the network. Palo Alto Networks' platform, Strata, Cortex and Prisma, provide a broad security fabric that covers data centers, branch offices and mobile users.

Bridgewise proprietary technology allows investors to identify key opportunities in context relevant sectors. Get in touch to get the full cybersecurity portfolio.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.