Cybersecurity continues to grab consistent media attention as hackers become increasingly emboldened. They’re also more ambitious in terms of targets, many of which are familiar companies behind goods and services consumed by Americans on a daily basis.
All of that is to say: The cybersecurity investment thesis remains as relevant as ever, and that’s likely to remain the case over the long-term, potentially spelling opportunity with ETFs such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). The Invesco ETFs, which follow the same index, are known for being artificial intelligence (AI) and semiconductor industry proxies, among other things. However, they’re also homes to several cybersecurity leaders.
Said another way, with QQQ or QQQM, investors get exposure to multiple cybersecurity names in efficient form while eliminating the stock-picking burden — attractive traits at a time when cybersecurity is notching significant growth.
“Cybersecurity is now a $270 billion market. And we expect it to grow at 12 percent per year through 2028. That’s one of the fastest growth rates across software,” said Meta Marshall, Morgan Stanley’s cybersecurity and network and equipment analyst.
QQQ: Inroad to Long-Term Cybersecurity Growth
As noted above, cybersecurity has several years (perhaps more) of attractive growth rates ahead. Alone, that fortifies the case for QQQ and QQQM. Still, there’s more to the story that could signal opportunity with the cybersecurity stocks residing in the Invesco ETFs.
“Chief Information Officers we surveyed expect cybersecurity spending to grow 50 percent faster than software spending as a whole. This makes cybersecurity the most defensive area of IT budgets—meaning it’s least likely to be cut, even in tough times,” added Marshall.
There are other sources of intrigue related to QQQ/QQQM and the intersection with cybersecurity investing. As Marshall points out, over the past three years, cybersecurity equities have outperformed the broader software space by margin of roughly 2.5-to-1. Of course, past performance is not a promise of future upside. However, it’s also difficult to argue with the long-term outlook for the industry and the necessity of related spending.
“Looking ahead, we see a handful of interconnected mega themes driving investment opportunities in cybersecurity,” concluded Marshall. “One of the biggest is platformization – consolidating security tools into a unified platform. Today, major companies juggle on average 130 different cyber security tools. This approach often creates complexity, not clarity, and can leave dangerous gaps in protection particularly as the rise of connected devices like robots and drones is making unified security platforms more important than ever.”
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