As cybersecurity is set to hit a $2 trillion total addressable market by 2030, investors are eyeing this rapidly evolving space for lucrative opportunities.
Stephanie Link, Chief Investment Strategist and Portfolio Manager at Hightower Advisors, shared her exclusive insights with Benzinga, on the trends propelling this growth.
Cloud Security & Regulatory Efforts: The Key Drivers
“There are multiple tailwinds to the cybersecurity industry,” Link asserted. “We believe the main trends come from cloud security adoption, regulatory efforts, and Generative AI.”
With 85% of global IT spend still on-premises, the opportunity for public cloud service providers and cybersecurity companies is immense.
Partnerships and acquisitions are reshaping the landscape:
- International Business Machines Corp (NASDAQ:IBM) sold QRadar software to Palo Alto Networks Inc (NASDAQ:PANW), incorporating WatsonX LLMs into its Cortex solution.
- Google’s parent Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) was in talks to acquire Wiz.
- CrowdStrike Holdings Inc (NASDAQ:CRWD) and Microsoft Corp‘s (NASDAQ:MSFT) partnership is under the spotlight following a software bug incident.
- Amazon.com Inc (NASDAQ:AMZN) furthered its collaboration with CrowdStrike earlier this year.
Read Also: Microsoft’s Strategic Pivot After Cybersecurity Mishap Impacts 8.5 Million PCs
Regulatory spending will boost the industry as global cybercrime costs are expected to grow by 15% annually, reaching $10.5 trillion by 2025.
“Considering the global impact we saw last weekend from CrowdStrike/Microsoft, regulatory action is imminent,” said Link.
Generative AI: Opportunity & Challenge
Generative AI plays a pivotal role in cybersecurity. “Increased Generative AI use cases will prompt more endpoints for companies to look after and increase the skill of hackers,” Link observes. Major players like Palo Alto, CrowdStrike, and Fortinet Inc (NASDAQ:FTNT) are already leveraging AI to enhance their offerings.
According to the Cloud Security Alliance (CSA), more than 55% of companies plan to adopt generative AI in the next year, with 67% using it for security purposes. “More technology will necessitate more protection, insurance, and compliance to safeguard networks,” Link emphasizes.
Undervalued Technologies: Zero-Trust & AI Security
Two areas stand out in the realm of technological innovation:
- Zero-Trust Architecture and
- Generative AI security products.
“Zero-trust architecture is growing in popularity but remains undervalued,” says Link. As organizations shift to cloud-based servers and remote work, zero-trust becomes essential. “Zero-Trust is based on the idea that no user or device should be automatically trusted,” with Palo Alto, Zscaler Inc (NASDAQ:ZS) and Okta Inc (NASDAQ:OKTA) leading this sub-sector.
Generative AI continues to offer significant opportunities. “It will impact how organizations scan for threats, automate responses, and improve predictive analysis,” Link explains.
Stocks like Palo Alto, CrowdStrike, and Fortinet should be on investors’ radars as they explore these advancements.
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