How to Play the Potential AI-Triggered Cybersecurity Apocalypse

by Sean Brodrick
By Sean Brodrick

In January, Ana Paula Assis, International Business Machines’ (IBM) General Manager for Europe, Middle East and Africa, asked a roomful of the world’s most powerful movers and shakers a question at the World Economic Forum in Davos, Switzerland.

She asked, “Is quantum (computing) going to really create a cybersecurity Armageddon?”

Then she answered her own question: “It’s going to.”

Let’s take a look at what she means in more detail … 

What Is Quantum Computing
and Why Is it so Scary?

So, what the heck is quantum computing? 

Quantum computing combines aspects of computer science, physics and mathematics. It uses quantum mechanics to solve complex problems faster than typical computers. There are different investable aspects to quantum computing, including hardware research and application development.

Now, there’s a difference between quantum computing and artificial intelligence — but quantum computing could accelerate AI into hyperdrive. That’s because AI is software, and a quantum computer will make that software faster and more powerful. 

Governments around the world are pouring money into developing quantum computers, and the private sector is, too. International Business Machines, Alphabet (GOOGL), Amazon.com (AMZN) and multiple startups have all created working quantum computers. 

Last April, Google revealed that one of its quantum computers had solved in seconds a problem that would’ve taken the world’s previously most powerful supercomputer 47 years.

So, bottom line: A new technology has come along that makes computers much faster, and the programs running on quantum computers can run at insane speeds. Quantum computing on its own isn’t scary. But if it’s misused, then it can be.

Cybersecurity Facts

So, what does that have to do with cybersecurity? 

Well, it turns out that AI is being used by both the white hats and the black hats in cybersecurity. And quantum computers make AI that much more powerful!

We all hear the stories about major corporations having their files stolen or seized by hackers. And you probably read that FBI Director Christopher Wray called Chinese cyberattacks “the defining threat of our generation.” You might even know someone who has had their identity stolen by online hackers.

Well, you can expect all of that to get WORSE in 2024.  

According to an IBM Institute report, the average total cost per data breach in 2022 was $4.35 million on a global scale. The U.S. breaches were the most expensive at $9.44 million.

A report done by Acumen Research and Consulting predicted the global market for AI-based cybersecurity products will reach $133.8 billion by 2030, up from $14.9 billion in 2021. That’s a CAGR of 27.62%.

And cybersecurity was growing, anyway. North America dominated the global market with a share of 44.10% in 2022, and it’s growing fast

Click here to see full-sized image.

 

That’s a compound annual growth rate of 13.8%.

No big surprise, then, that cybersecurity spending as a percentage of overall information technology spending increased in 2023 and is expected to continue on that path.

Click here to see full-sized image.

 

So, we have a market that was already growing in response to a threat that keeps getting bigger. Now, we have new AI programs running on new quantum computers that will supercharge both the threat and response. What do you think you should be doing?

If your answer is, “Invest in cybersecurity,” you get a gold star.

My Supercycle Investor subscribers are already doing this. If you’re doing it on your own, there are a number of funds that track the cybersecurity industry. 

The best of them is the First Trust NASDAQ Cybersecurity ETF (CIBR). It has a Weiss Rating of “C” and an expense ratio of 0.6%. It holds a basket of leading cybersecurity stocks. And as this performance chart shows, it is leaving the S&P 500 in the dust …

CIBR vs. S&P 500 performance. Click here to see full-sized image.

 

You can see that CIBR started outperforming the S&P 500 big time in October. That trend is holding. 

While past performance is no guarantee of future success, in these days of AI and quantum computers, I expect the demand for cybersecurity will only increase from here, not lessen.

That’s all for today. I’ll be back with more soon.

All the best,

Sean

About the Contributor

Supercycles aren't daily occurrences. They happen in stages and can last for years. Sean Brodrick identifies them early and mines for the most financially sound stocks within them. And he taps into the powerful Weiss Ratings, along with our proprietary AI Performance Booster, to help him do it!

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