Increasing adoption of Artificial Intelligence (AI) in day-to-day activities of businesses poses great benefits to operations by increasing efficiency but at the same time making companies more vulnerable to cyber attacks.

As businesses increasingly transition their operations online, the threat of disruptions posed by malware attacks and ransomware becomes evident, highlighting the growing need for cybersecurity.

In today's landscape, cybersecurity serves a dual purpose: protecting organizations from cyber threats while helping them seamlessly transition to a wider online presence. Keeping up with the evolving and asymmetrical characteristics of the space, continuous investment in cybersecurity becomes essential.

Why Companies Should Increase Spending on Cybersecurity

According to IMF, since the pandemic, companies have witnessed cyber attacks surge twofold, with the threat of significant financial losses escalating. The losses from cyber attacks have increased drastically from 2017, quadrupling to about $2.5 billion. Additionally, indirect repercussions, such as reputational harm and heightened security spending, create more problems for organizations.

Given the pervasive impact of globalization and interdependency across sectors, the increasing threat to different sectors becomes a cause of concern, especially the threats to the financial industry. Increased cyber attacks on the financial sector have the potential to disrupt the financial and economic stability of other sectors, the effects of which might spill over to a global event.

Also, the dependency of companies on the digital landscape after the pandemic, increases vulnerability. Digital technology has connected people on an unprecedented scale and speed, simultaneously empowering cyber attacks, making it more aggressive in terms of frequency and complexity.

Emergence of Deepfake as a New Threat

A deepfake refers to a digitally modified video, audio or image of an actual individual, typically manipulated using artificial intelligence techniques, to deceptively portray them.

According to CNBC, a surge in the threats to companies from deepfake scams, which result in multimillion-dollar losses, is only anticipated to worsen as criminals exploit generative AI for frauds. As AI technology advances, the scale and complexity of these scams have grown exponentially, which only highlights the growing need for increased investment in the sphere.

According to Jason Hogg, cybersecurity expert and executive-in-residence at Great Hill Partners, as quoted on CNBC, deepfakes of top executives of companies can be generated to spread misleading information to manipulate stock prices, impacting the companies’ reputation and proving detrimental to their stock prices.

Escalation of Geopolitical Cyber Attacks

The growing Middle East crisis, particularly between Israel and Gaza has brought cybersecurity under the spotlight. The increasing use of attacks by hackers underscores the need for more robust cybersecurity measures, especially given how conflicts are being brought online by the use of digital tools.

According to S&P Global, increasing ransomware attacks also pose a significant threat. These attacks typically begin with phishing, exploiting vulnerable software or IT misconfigurations. Once the attacker controls the initial system, they can spread across the network, disabling it and demanding a ransom for a decryption key to unlock the files.

Critical National Infrastructure (CNI), such as the shipping industry and nuclear power plants, have also come under more cyber attack threats in recent years. This highlights the urgency for a global unified stand on cybersecurity by governments and companies as cyberthreats evolve and get more complicated.

ETFs in Focus

The increasing threat of cyber attacks and the incorporation of AI in everyday business operations, underscores the need for more investments in the cybersecurity domain.

The cybersecurity space remains promising, anticipated to witness a CAGR of 13.8% from 2023 to 2030, reaching a valuation of $424.97 billion in 2023, 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 Quick QuoteCIBR - Free Report) has gained 36.42% over the past year.

Amplify Cybersecurity ETF (HACK Quick QuoteHACK - Free Report) has gained 37.44% over the past year.

iShares Cybersecurity & Tech ETF (IHAK Quick QuoteIHAK - Free Report) has gained 31.94% over the past year.

Global X Cybersecurity ETF (BUG Quick QuoteBUG - Free Report) has gained 31.66% over the past year.

WisdomTree Cybersecurity Fund (WCBR Quick QuoteWCBR - Free Report) has gained 47.28% over the past year.