What to know about investing in cybersecurity
Editorial staff, J.P. Morgan Wealth Management
- Cybersecurity stocks have been strong performers in recent years for good reason: Companies and individuals need protection from hackers.
- With the number of cyberattacks growing – and the rapid advancement of artificial intelligence (AI) – the need for cybersecurity is also increasing.
- A cybersecurity-focused exchange-traded fund (ETF) can give you exposure to the entire sector.
The internet can be a scary place, as cybercriminals and hackers continue to change tactics and attack in unexpected ways. Data maintained at third parties – which affects pretty much all of us at this point, like it or not – is also at risk. To this end, cybersecurity companies provide protection, relying on a bevy of advanced technologies to stave off digital predators. As cyberattacks evolve, so must the security.
Recent advancements in artificial intelligence (AI), as well as AI’s rising prevalence across sectors, also greatly increase the need for cybersecurity.
As a result, the cybersecurity sector has performed well. The S&P Kensho Cyber Security Index, for example, returned 13.44% in 2025. While this number lagged behind the S&P 500’s overall 17.9% 2025 performance, cybersecurity stocks are still returning above the S&P 500 Index’s historical average of 10%–11%. Perhaps more importantly, it's an industry poised for growth, making it attractive to investors.
It may seem straightforward, but investing in cybersecurity goes beyond protecting computers from malware and ransomware attacks. Some cybersecurity companies serve corporations, while others protect government agencies and the nation's infrastructure. There are also cybersecurity firms focused on consumers, the internet or both. As a result, the market is big, with many options to choose from. Before you choose a cybersecurity investment option, here are a few things to consider about the cybersecurity industry.
Growth on the horizon
Cybercriminals are only getting smarter, staying one step ahead of everyone else. A slew of high-profile attacks in recent years reminded companies of the need to invest to protect their networks. Enterprises’ reliance on digital technologies has also been exploding, requiring more need for cybersecurity services.
When selecting cybersecurity investing options, you might consider ones that include companies that operate in large and growing markets, have high margins and are among the leaders in their area. You may also want to identify the companies with the cash to innovate and the ability to offer stable growth.
Get up to $1,000
When you open a J.P. Morgan Self-Directed Investing account, you get a trading experience that puts you in control and up to $1,000 in cash bonus.
Investment options to consider
There are several ways to invest in the cybersecurity industry, including the following:
Thematic exchange-traded funds (ETFs). Investors who want to gain exposure to the cybersecurity market may want to consider an ETF focused on U.S. and global companies providing cybersecurity services and network protection. With an ETF, you get access to a basket of stocks in the industry, providing you with sector diversification.
Individual stocks. Hands-on investors may prefer to invest in individual cybersecurity companies instead of a basket of them. In that case, there are several areas of the market to focus on.
- Endpoint security providers develop software to protect networks by securing the devices connected to them. Antivirus and malware software providers fall into this category.
- Network security providers serve companies by protecting their networks from external and internal threats.
- AI-focused cybersecurity companies use advanced technology to protect computer and cloud networks and mobile devices.
- Defense and aerospace companies are increasingly getting into the cybersecurity game as risks from global hackers increase.
Stocks big and small
The cybersecurity industry provides services to companies and individuals around the globe. When it comes to investing in them, you can go with a pure-play vendor, a large company that does more than just cybersecurity or one focused on advanced technology. You can find large-, mid- and small-cap cybersecurity companies. Some operate only in the U.S., while others are global.
Doing your homework is key when investing, which is why an ETF or mutual fund may be a good choice for those wading into the industry since you get professional management and diversification. Individual stock investing requires more due diligence on your part or your advisor if you use one.
Risks
Just like any industry, there are risks to cybersecurity investing, including the following:
- Valuations are lofty. While opportunities abound for growth in the sector, that hasn’t been lost on investors, especially since the COVID-19 pandemic. As a result, cybersecurity stocks have performed well – exceptionally well in some cases. That means investors should be discerning when selecting which individual stock to buy. You don’t want to overpay for cybersecurity exposure.
- Companies could rein in cybersecurity spending. Consumers, corporations and government agencies make up the majority of the business for cybersecurity companies. Even though there is always demand for digital protection, the amount can ebb and flow depending on the economy. If the U.S. falls into a recession, companies and individuals may pull back spending, which could hurt sales at cybersecurity companies. While this risk may be rather low, as protecting computer systems is increasingly important in the wake of high-profile cyberattacks, it's still something to be mindful of. One area that shouldn’t see much if any pullback is government spending on cybersecurity.
- Tech could become obsolete. Technology moves fast and is ever-changing, which requires cybersecurity companies to be nimble. What worked yesterday may not work tomorrow. Investors run the risk of choosing cybersecurity stocks with tech that quickly becomes obsolete. That could result in a big decline in sales and thus the company’s stock. To help counter that, look for companies with a leadership position, strong cash flow and a long track record of innovating.
The bottom line
The cybersecurity market is large and broad, providing investors with an opportunity to enter from many different angles. That can be overwhelming – but also potentially rewarding. Not sure which way to go? A J.P. Morgan professional can help.
Invest your way
Not working with us yet? Find a J.P. Morgan Advisor or explore ways to invest online.
Editorial staff, J.P. Morgan Wealth Management
