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Top 6 Cybersecurity + AI ETFs Poised for Future Growth

Top 6 Cybersecurity + AI ETFs Poised for Future Growth

Protect Your Portfolio and Profit from the AI Boom

27 Sep • Estimated Reading Time: 11 minutes

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Cybercrime is a growing threat in an increasingly digital world. But amidst this challenge lies opportunity. Artificial intelligence is revolutionizing cybersecurity, creating a powerful alliance for investors. Dive into the top six cybersecurity + AI ETFs and position yourself at the forefront of this exciting intersection.

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Applovin Corp is just one of the 31 stocks that have yielded a +29.47% return year to date. Consider exploring the other stocks to determine their suitability for your investment portfolio.

Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.

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6 Cybersecurity + AI ETFs to Watch in 2024

As we look into the future of our economy, the sectors likely to drive the most growth over the next decade are artificial intelligence (AI), cybersecurity, robotics, semiconductors, and software. Given the increasing frequency and scale of cyberattacks worldwide, cybersecurity plays a critical role. In fact, global cybercrime losses exceed $9.5 trillion annually—only two economies in the world have higher GDPs than these staggering losses.

The intersection of cybersecurity and AI presents a unique opportunity for investors. Cybersecurity companies increasingly leverage AI technologies to enhance threat detection, automate responses, and secure vast networks. For investors, several exchange-traded funds (ETFs) offer exposure to this growing trend, combining the best of cybersecurity and AI-driven solutions. Here’s a breakdown of the six best cybersecurity + AI ETFs you should watch.

1. SPAM - Themes Cybersecurity ETF

Overview: This new ETF focuses on future security technologies, including AI-driven cybersecurity.
Top Holdings: Okta is known for its single sign-on (SSO) and multi-factor authentication services.
Key Highlights: Okta has been solid in the past year, and Wall Street has rated it a buy. Although SPAM lacks a long performance history, its low expense ratio makes it a fund to watch.
Investment Consideration: This is great for those seeking early exposure to AI-powered cybersecurity, but due to its infancy, long-term performance has yet to be determined.

2. WisdomTree Cybersecurity Fund (WCBR)

Overview: With 25 key holdings, WCBR provides significant exposure to cybersecurity and AI companies.
Top Holdings: CrowdStrike, a leading AI-enhanced cybersecurity company.
Key Highlights: CrowdStrike is rated a strong buy. While the ETF’s year-to-date performance has lagged, its one-year performance is strong. WCBR offers an excellent way to invest in cybersecurity as it enters a new growth phase.
Investment Consideration: If you're looking for solid growth and a reasonably priced ETF, WCBR is a compelling option despite its short three-year dip.

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3. HACK - Amplify Cybersecurity ETF

Overview: This fund targets cybersecurity leaders, integrating AI into threat detection and data security.
Top Holdings: Broadcom, which owns Symantec Systems, a long-established name in enterprise security.
Key Highlights: HACK has outperformed the S&P 500 on a one-year basis, but longer-term performance has been mixed. Symantec’s role in consumer and enterprise cybersecurity makes HACK’s holdings robust for AI-driven security.
Investment Consideration: Though its expense ratio is slightly high at 0.6%, HACK’s solid short-term returns make it a good option if market growth continues.

4. BUG - Global X Cybersecurity ETF

Overview: BUG combines cybersecurity and AI, offering exposure to cloud and network security leaders.
Top Holdings: CrowdStrike and Zscaler both well-regarded for cloud and IoT (Internet of Things) security.
Key Highlights: Despite recent market volatility, Zscaler and CrowdStrike have delivered strong returns. BUG's one-year return is over 40%, showcasing its potential for investors looking to capture high short-term growth.
Investment Consideration: With a middle-of-the-road expense ratio, BUG is a strong option for those focusing on cloud-based cybersecurity companies driven by AI.

5. IHAK - iShares Cybersecurity and Tech ETF

Overview: A broad exposure ETF that includes AI-powered cybersecurity firms across the tech sector.
Top Holdings: Okta and SentinelOne specialize in AI for threat detection.
Key Highlights: IHAK has 50 holdings and an expense ratio of 0.47%, making it a diverse option. SentinelOne’s automation capabilities with AI provide an edge, and the fund’s one-year return has exceeded 40%.
Investment Consideration: Strong long-term performance and low costs make IHAK one of the more balanced choices for those looking for broad AI-cybersecurity exposure.

6. CIBR - First Trust NASDAQ Cybersecurity ETF

Overview: This ETF is the best long-term performer among cybersecurity ETFs, leveraging AI for enhanced security operations.
Top Holdings: Broadcom, CrowdStrike, and CyberArk Software, known for identity and access management.
Key Highlights: CIBR’s expense ratio is 0.59%, but its one- and three-year returns beat the S&P 500. Companies like CyberArk have delivered nearly 90% growth, showing the sector’s strong momentum.
Investment Consideration: If you’re after long-term growth with solid historical performance, CIBR is a top-tier choice. It offers a diversified portfolio of AI-driven cybersecurity stocks.

Authors Notes

These six ETFs offer exciting opportunities in the cybersecurity sector, driven by advancements in AI. Whether you’re looking for short-term growth or long-term stability, there’s a fund to match your investment goals. Keep an eye on overlaps between holdings, especially when choosing multiple ETFs, to ensure you maintain diversification. Investing in cybersecurity + AI is a smart move as the demand for more robust digital security solutions continues to increase in the face of evolving threats.

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The information presented here is for informational purposes only and should not be construed as financial advice. Always consult with a qualified financial advisor before making any investment decisions.

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