Editor's note: Artificial intelligence is revolutionizing industries worldwide – including cybercrime. But according to Joe Austin, a senior analyst for our corporate affiliate Chaikin Analytics, this same technology is being used to fight against the threats it has created. In this issue, adapted from the free Chaikin PowerFeed daily e-letter, Joe explains why cybersecurity will become a booming market for investors...

A 'Silver Lining' to AI in Cybercrime

By Joe Austin, senior analyst, Chaikin Analytics

Last year, impostors cost victims nearly $3 billion in the U.S. alone...

According to the Federal Trade Commission, impostors were the No. 1 reported scam in the U.S. in 2024. Globally, the cost of cybercrime was estimated to be $9.5 trillion last year. And this year, it's expected to reach $10.5 trillion.

With numbers like that, if cybercrime were a standalone country, it would be the third-largest economy in the world – behind the U.S. and China.

Scams using artificial intelligence ("AI") have made this threat a lot worse. And AI cybercrime isn't going away.

You might have heard about scams using AI-based fake voices. But those are only part of this massive problem. And as it evolves, we're going to need creative, advanced solutions...

AI Makes Cybercrime Easier Than Ever

Cyberattacks are an even bigger business. That's where criminals try to breach a company or organization's information systems.

Just last year, oilfield-services company Halliburton (HAL) spent $35 million after a cyberattack in August.

And insurance giant UnitedHealth (UNH) said last year that the projected costs from a massive cyberattack against one of its business units would be more than $2.3 billion.

In the past, cyberattacks were a "bespoke" kind of job. Criminals needed a certain level of expertise to know which systems to go after... and how best to crack them.

But today, AI gives even novice criminals all the tools they need...

They don't need to know where to target. Instead, they can attack every point in a company's infrastructure at once.

With AI, criminals can also automate the entire process. And they can keep trying until they succeed... or until they decide to move on to a more attractive target.

Phishing is another huge market. That's where criminals use fake e-mails to steal sensitive information, like passwords or credit-card numbers.

Phishing on a big scale was difficult in the past. Criminals had a harder time producing e-mails that looked real.

But with AI, they can now create highly authentic and personalized content. That makes the attack much harder to detect.

Data-security company Kaspersky identified nearly 900 million phishing attempts blocked by its software in 2024. That's a 26% increase year over year.

Kaspersky also found that 1 in 2 e-mails in corporate inboxes was spam. And that included more than 125 million e-mails with malicious attachments.

And because of AI, it's getting easier to fall for these attacks...

In 2023, security awareness and training provider SoSafe conducted a study using AI-generated phishing e-mails. It found that targets opened 78% of these simulated e-mails. And 21% clicked on the malicious content within.

The study also showed that 65% of people revealed personal information on websites linked via AI-generated e-mails.

So it's no surprise that companies are spending big money to fight this...

Taking Advantage of a Booming Market

Spending on cybersecurity – including hardware, software, and services – was about $215 billion last year. By 2035, this market is expected to more than triple to $697 billion.

That's a compound annual growth rate of 11.3%.

So one easy way to take advantage of this trend is to look at exchange-traded funds ("ETFs") focused on cybersecurity...

Two big ETFs in the space are the First Trust Nasdaq Cybersecurity Fund (CIBR) and the Amplify Cybersecurity Fund (HACK). Their assets total nearly $10 billion and more than $2 billion, respectively.

Looking at these funds in the Power Gauge, both currently earn "very bullish" ratings...

At Chaikin Analytics, we use the Power Gauge to gather investment fundamentals and technicals into a simple rating of "very bullish" to "very bearish." It's a simple way to look "under the hood" with every tool at our disposal.

Of course, you can also dig deeper with individual stocks...

As you would expect, large tech companies like Microsoft (MSFT) and Cisco Systems (CSCO) build security into their product offerings.

But other companies are more focused on cybersecurity specifically. And these types of "pure plays" are generally more interesting.

AI Itself Is a 'Silver Lining' With Cybercrime

Despite the AI surge in cybercrime, the technology can be used against itself to fight this type of activity...

Risk-advisory company Kroll released its 2025 Financial Crime Report earlier this year. It's a study of corporate executives worldwide. The report showed that 57% of respondents thought that AI would help with financial crime compliance programs. And more than half of the respondents were investing in both AI and non-AI tech to address these risks.

But that's not all...

More than 70% of survey respondents expected the risk of financial crimes to increase in 2025. And only 23% of them rated their current compliance programs as "very effective" in fighting it.

So there's still lots of work to do. Companies will have to continue spending piles of money on cybersecurity.

Folks, the main point is clear...

When it comes to cybersecurity, this is a big trend to watch in the long run.

Good investing,

Joe Austin

Editor's note: Marc Chaikin, founder of Chaikin Analytics, just went live with his biggest breakthrough ever. His new investment tool isolates the 2.3% of AI companies that could be about to announce a massive earnings beat... to help you catch the next double or triple. And now is the time to put it to work – because according to Marc, today could mark the start of this year's biggest turning point in the market.

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