The AI trade has been dominated by headlines surrounding semiconductors and memory chips. Besides chips, other areas are seeing huge AI-related demand. One of those areas is cybersecurity. Every advance in AI makes organizations more productive and efficient, but also creates new vulnerabilities that cybercriminals are eager to exploit.
As businesses race to adopt AI, they are discovering that protecting their data, networks and cloud infrastructure isn’t just important, but mission-critical. And it’s fueling a powerful new wave of spending.
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A Rotation Gathers Steam
After a mid-year decline in software stocks, money has come flooding back into cybersecurity names. Since the software low, cybersecurity sector leaders like CrowdStrike, Palo Alto Networks, Zscaler, and Okta have all rallied.
The strength in cybersecurity stocks came precisely as chip stocks stumbled. The message from business is that no matter how much they are spending on AI, they are spending on protecting themselves right alongside it.
AI is a Double-Edged Sword
On offense, attackers are using AI to craft alarmingly convincing phishing campaigns, discover software vulnerabilities faster than ever, generate deepfakes that defeat traditional verification, and automate attacks at a scale that was previously unthinkable.
As powerful AI capabilities proliferate across the internet, the threat expands alongside them. The tools available to bad actors have never been more sophisticated. Organizations are being forced to abandon legacy defenses in favor of AI-powered security that can detect and respond to threats in real time.
On the defense side, an entirely new attack surface is emerging that barely existed two years ago: the machine identity. As enterprises race to deploy AI agents across their operations, each agent effectively becomes a new digital “employee.” These agents need credentials, permissions, and governance every bit as much as a human worker does.
Industry leaders have begun describing agentic AI as a new workforce inside every organization, one that creates a surge of identities that must be secured and managed alongside people. The companies that provide identity, endpoint, network, and cloud protection are the gatekeepers of this new world, and demand for their services is increasing as a result.
Gartner projects enterprise cybersecurity budgets will reach roughly $215 billion in 2026, and broader industry forecasts see the global cybersecurity market growing to nearly $700 billion by 2034.
First Trust NASDAQ Cybersecurity ETF (CIBR)
The cybersecurity industry is populated with volatile stocks. Another way to gain exposure is an exchange-traded fund. The First Trust NASDAQ Cybersecurity ETF tracks the Nasdaq CTA Cybersecurity Index and holds roughly 50 companies spanning the entire security ecosystem.
Its top holdings include Palo Alto Networks (9%) and Fortinet (9%), followed by CrowdStrike (8%), along with Cisco, Broadcom, Cloudflare, Okta, F5, Zscaler, and Akamai. CIBR has returned roughly 30% year to date. The ETF has about $14.4 billion in assets and an expense ratio of 0.58%. It has become one of the largest and most liquid ways to own the group.
Mark Notes
Cybersecurity is becoming a durable secular theme in the market. The AI era only strengthens the case. Artificial intelligence is at once the sharpest new weapon in the attacker’s arsenal and the most powerful tool in the defender’s. As businesses pour money into building AI, they have no choice but to spend right alongside it to protect what they’ve built.
The current rotation back into cybersecurity reflects a fundamental, escalating reality of doing business in a connected world. The group has already moved higher, and volatility will follow, but cybersecurity is one of the most powerful and enduring trends of this decade.
This article is for general informational and educational purposes only. It is not intended as financial advice, investment guidance, or a recommendation to buy or sell any security. The content reflects publicly available information and broad market commentary. Readers should conduct their own research and consult a licensed financial professional before making investment decisions.
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