Cybersecurity Market Poised for Explosive Growth, Driven by Cloud Adoption, Regulation, and Generative AI
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.
Key Takeaways:
- Cloud security is a major driver, with 85% of global IT spend still on-premises.
- Regulatory efforts will boost spending due to rising cybercrime costs expected to reach $10.5 trillion by 2025.
- Generative AI presents both opportunities and challenges, increasing attack vectors while also enhancing cybersecurity tools.
- Zero-Trust architecture and AI-powered security products are undervalued technologies with immense potential.
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 the vast majority of IT 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 (IBM) sold QRadar software to Palo Alto Networks Inc (PANW), incorporating WatsonX LLMs into its Cortex solution.
- Google’s parent Alphabet Inc (GOOG, GOOGL) was in talks to acquire Wiz.
- CrowdStrike Holdings Inc (CRWD) and Microsoft Corp‘s (MSFT) partnership is under the spotlight following a software bug incident.
- Amazon.com Inc (AMZN) furthered its collaboration with CrowdStrike earlier this year.
Regulatory spending will further 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 (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
- 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 (ZS), and Okta Inc (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.
Navigating the Changing Cybersecurity Landscape
The cybersecurity industry is rapidly evolving, driven by the increasing sophistication of cyber threats, the growing adoption of cloud computing, and the rise of generative AI. This dynamic landscape presents both opportunities and challenges for investors.
For investors looking to capitalize on this growth, key considerations include:
- Focus on leading players: Companies like Palo Alto, CrowdStrike, and Fortinet are well-positioned to benefit from the demand for cloud security solutions, AI-powered security products, and zero-trust architecture.
- Understanding emerging technologies: Generative AI is transforming cybersecurity, creating new threats while also enhancing security capabilities.
- Considering regulatory initiatives: As governments worldwide prioritize cybersecurity, regulatory efforts will drive increased spending and provide opportunities for cybersecurity companies.
- Long-term perspective: The cybersecurity market is expected to grow significantly over the next decade. Investors should take a long-term view and focus on companies with strong fundamentals and a clear vision for the future.
The cybersecurity landscape is constantly changing, making it imperative for investors to stay informed and adapt to new trends. By understanding the key drivers of growth, emerging technologies, and regulatory initiatives, investors can position themselves to capitalize on the lucrative opportunities within this dynamic sector.
