AI remains the most prominent theme in the technology sector. But that doesn’t diminish the relevance of other important tech growth outlets, including cybersecurity.
Among related ETFs, the WisdomTree Cybersecurity Fund (WCBR) is notching solid results this year. Investors may have ushered cybersecurity stocks to the backburner in favor of AI fare. But the former remain opportunity-rich and as relevant as ever. That’s particularly true because cyberattacks aren’t declining and bad actors are increasingly emboldened.
Then there are the financial ramifications of cyber intrusions. A recent report by Moody’s Investors Service noted $7.1 trillion in corporate debt across the airline, education, electric utility, industrial, medical products, and transportation sectors could be at risk of downgrade if companies in those groups fall victim to large-scale data breaches.
WCBR Long-Term Outlook Appealing
One of the most oft-discussed issues with AI is usage cases. But that’s a mountain cybersecurity companies, including WCBR components, have already conquered. As Moody’s pointed out, the playing field for cybersecurity product and service providers is expansive.
“We now score two thirds of industries globally as highly or very highly [digitized. That brings] total rated debt in those classifications to 87%, from 74% in 2022. Underscoring the critical dependence of the various sectors on digital infrastructure and the extensive ramifications of such disruptions, was the July 2024 CrowdStrike incident where a defective software update led to the malfunction of millions of Windows devices in numerous industries globally,” according to the ratings agency.
Potentially adding to the long-term thesis for cybersecurity and ETFs such as WCBR is the point that corporate spending on this front isn’t discretionary. It’s a necessity. As Moody’s observes, companies that endure significant cyberattacks could be punished via lower credit grades. Not only that, but there is reputational risk. Consumers want to know that the companies they’re doing business with are safeguarding their data. When that doesn’t happen, consumers can and do vote with their wallets.
Rich Growth Potential
Put another way, cybersecurity should be previewed as preventative medicine, not a reactive procedure for after injury has occurred. Astute corporate technology teams know as much. They’re willing to spend on the goods and services offered by WCBR member firms. Data confirms there’s rich growth potential for the stocks residing in the ETF.
“Major telecom companies have experienced damaging cyberattacks in recent years, while the dependence of airlines on digital technology has made it vulnerable to operational disruption. Electric, gas and water utilities, and not-for-profit hospitals are also at the highest risk level. All these industries are highly digitized and play a crucial role in the functioning of society and the economy,” added Moody’s.
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