AI, Cybersecurity Intersection Could Propel These ETFs

As disruptive technologies grow and evolve, they often converge with other innovative fields. That’s certainly happening with artificial intelligence, which is converging with the likes of cloud computing, innovative health and many more.

Add cybersecurity to that growing list. As global cyber threats grow, so does the need for more automation in the cybersecurity space. That can help bolster cyberdefenses and rebuff attempted hacks. AI can help achieve those goals. This could be a long-term plus for exchange traded funds that provide exposure to both themes.

The Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) do just that. As the ETFs that track the traditional version of the venerable Nasdaq-100 Index (NDX), QQQ and QQQM feature exposure to a variety of companies with direct AI ties as well as holdings in several dedicated cybersecurity firms.

AI, Cybersecurity Convergence Good for QQQ, QQQM

Also, cybercrime is on the rise, not falling. While breaches can take varying forms, an array of corporations, government entities and other institutions are vulnerable. Throw in the adverse effects of identity theft on millions of people and it’s obvious there’s a need for AI to bolster cybersecurity.

Wall Street is catching on to this convergence. In a recent note to clients, Morgan Stanley analyst Hamza Fodderwala discussed AI/cybersecurity opportunities.

“With generative AI being used to create and mutate malware faster than ever before, we think this significantly increases the need for overburdened security organizations to invest in automation,” observed the analyst.

Among individual stocks with AI/cybersecurity ties, Fodderwala likes Microsoft (NASDAQ: MSFT) – the largest holding in QQQ and QQQM – Crowdstrike Holdings (NASDAQ: CRWD), Fortinet (NASDAQ: FTNT) and Palo Alto Networks (NASDAQ: PANW). That quartet combines for over 14% of the Inveso ETFs’ portfolios.

“While still early days and likely a net tailwind for the group, we think the most immediate beneficiaries are those with large, unique data sets across multiple threat vectors. Based on our framework … the leading beneficiaries include MSFT and PANW, followed by FTNT and CRWD,” according to the Morgan Stanley analyst.

There are compelling reasons for corporations to embrace the AI/cybersecurity combination. Morgan Stanley estimates that security analysts spend as much as 40% of their time on work that can be automated. If companies automate those tasks, they could save up to $100 billion.

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