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My identity was stolen once, and that was about as fun as it sounds. After returning from a trip abroad, I noticed a series of errant charges on my credit card statement, including a handful of sneaker stores across Tokyo. That immediately seemed off. At that juncture in my life, I only wore flip-flops, and the closest I’d ever been to anything resembling Japan was my favorite late-night sushi bar.
Unfortunately, I’m hardly alone: 22% of Americans report being victims of identity fraud, and 73% of those involve financial identity theft. So protecting our sensitive information has become a big business.
However, protecting the sheer volume of big businesses’ sensitive information has become an even bigger business.
Grand View Research said the cybersecurity market was worth $246 billion last year. By 2030, it’s projected to double to $500 billion. That’s attributed to heightened demand in a world with an increasing number of cyberattacks, ever-expanding adoption of e-commerce platforms, and a proliferation of smart devices, which has resulted in people becoming more reliant upon mobile financial transactions.
North America was the largest market in 2024, but the Asia Pacific is the fastest-growing market. For those who want to invest in this trend, one ETF provides exposure to a basket of the information technology sector's leading global cybersecurity firms by mirroring an index that tracks their performance.
Underscoring the need for these services is a common theme over the past several years: AI. With the technology becoming commonplace, the need for innovative cybersecurity applications has arisen, making highly integrated systems that are adaptive, multi-layered, and self-learning imperative.
The good part is that the firms offering these services increasingly turn to AI themselves. The other side of that coin? Cybercriminals are, too. As a result, AI has become a double-edged sword for the industry, creating demand for preventative and enhanced defenses such as predictive threat intelligence and automated breach containment.
On the other hand, the more sophisticated AI becomes, the more likely it will be to empower and incentivize cybercriminal activity through attacks involving malware and ransomware deployment. A study published earlier in September by MIT Sloan and Safety Security found that, of the 2,800 ransomware attacks it reviewed, 80% were powered—to some degree—by AI.
Global enterprises now typically commit between 10% and 20% of their IT budgets strictly to cybersecurity. But those services aren’t just needed by individuals and companies. Governments around the world are increasingly reliant on Big Data, which in turn is fueling spending that supports cybersecurity market growth. For example, by the end of 2025, the U.S. federal government will have doled out $13 billion to combat this growing threat.
For investors who want a piece of this growing pie, the Global X Cybersecurity ETF (NASDAQ: BUG) is an all-in-one solution. While a 0.51% expense ratio may be on the higher side for a passively managed fund, BUG provides exposure to a veritable who’s who of the cybersecurity industry, with its top five holdings including:
The fund is well-balanced; those five positions account for over 30% of the portfolio. In total, 25 total holdings spanning countries such as the United States, Israel, Japan, Canada, and South Korea aim to replicate the performance of the Indxx Cybersecurity Index.
That has worked out well since its inception on Nov. 1, 2019. Since then, the BUG has been up 122.58% while paying a modest dividend that currently yields 0.08%. Its performance as of late has been far more impressive, though. Since its five-year low on Jan. 6, 2023, the fund has been up more than 75%, including a nearly 19% gain from its year-to-date low in April.
Wall Street seems to be attuned to the growing demand for cybersecurity services. Institutional buyers (134) have outnumbered institutional sellers (72) over the past 12 months.
Although volume can be light, inflows of nearly $198 million have surpassed outflows of $63 million by a sizable margin over the same period. At the same time, short interest is a mere 0.73% of the 32.7 million shares outstanding.
While the BUG isn’t exactly illiquid, the average daily trading volume of 286,744 is something to be mindful of. But if you’re for a buy-and-hold broad play for cybersecurity, this ETF has far more to like than dislike.
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The article "Cybersecurity Market Set to Double: This ETF Offers Exposure" first appeared on MarketBeat.
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