Blogs -The Next Market AI Will Disrupt Is Cybersecurity

The Next Market AI Will Disrupt Is Cybersecurity


October 04, 2023

author

Beth Kindig

Lead Tech Analyst

This article was originally published on Forbes on Sep 29, 2023,12:05am EDT

Cybersecurity is one of the highest costs that enterprises face at 12% of IT budgets on average, and this cost is rapidly rising. While a company can lay off staff or reduce marketing and R&D expenses during a period of lower growth, enterprises cannot compromise on cybersecurity. The rise in the number of attacks and the increased sophistication of attacks means this expense will continue to grow, yet AI and automation can help.

According to Cybercrime Magazine, if cybercrime were a country, it would be the world’s third-largest economy, second to the United States and China. The costs that enterprises dedicate to cybersecurity are expected to increase from $8 trillion to $10.5 trillion by 2025. Statista agrees with Cybercrime Magazine’s estimates, stating the cost of cybercrime will reach $10.3 trillion by 2025 and $13.8 trillion by 2028.

At the I/O Fund, we are positioning for AI and automation to play an important role in this critical, no-compromise industry. There are 560,000 new pieces of malware detected every day, and software systems cannot keep up with this. AI is already assisting human teams in identifying which threats require more analysis, and in the near-term, this will meaningfully lower cybersecurity costs. There is also a shortage of cybersecurity talent, with a 2022 survey stating 59% of companies have a shortage in this department and may not be able to effectively handle a cybersecurity attack.

Below, we look at how AI is set to disrupt cybersecurity next and what is being said on the topic.

Sign up for I/O Fund's free newsletter with gains of up to 221% - Click here

How AI Can Improve Incident Response and Threat Detection

Combining cybersecurity with AI has a natural affinity as cyberattacks are computer generated, and in turn, computers are uniquely capable of finding computer-generated threats. Automation reduces the number of false positives. Instead of getting every piece of telemetry that requires the security team to investigate, AI-assisted endpoint detection and response solutions eliminates the noise so that the security team is only responding to those that have the potential to be critical.

Fundamentally, cybersecurity is a data problem. Cybersecurity platforms ingest, correlate, and query petabytes of structured and unstructured data from disparate external and internal sources in real-time. Cybersecurity platforms then build rich context and deliver greater visibility by constructing a dynamic representation of data across an organization.As a result, AI-driven cybersecurity platforms are often highly accurate in triggering a response.

The number of endpoints in a corporate network are exponentially growing with 27 billion endpoints expected to be connected by 2025. There have been staggering studies done that show 68% of enterprises have experienced a compromised endpoint. Compromised credentials across desktops, laptops, and mobile devices are often the hardest points of access to secure. Algorithms can detect new malware on endpoints based on the attributes of known malware. Unauthorized access, data breaches and cyber threats from endpoints will also help to drive demand for edge-based, decentralized AI cybersecurity solutions.

The network security market is a large contributor to cybersecurity spend. Machine learning algorithms help systems to learn by experience, which helps to identify malware in encrypted traffic and find insider threats. Machine learning algorithms do not need to decrypt, rather can spot the malicious patterns and find threats hidden with encryption.

Cloud security is the fastest growing segment within cybersecurity. AI/ML can help to identify suspicious cloud app logins, detect location-based anomalies, and quickly identify threats through IP reputation analysis. Threat prevention is possible through ingesting cloud telemetry with AI systems, foregoing the need for expert rule engineering. Attack path simulation is also made possible with AI, to help simulate the path an attacker would take to reduce coverage gaps. Egress web traffic can be monitored without the need to configure virtual machines by focusing on limiting egress based on source, identity, destination and request types. Machine learning models can also detect new API threats based on large training data sets. These are a few examples of how AI/ML is improving cloud security.

Chat-GPT heightens security risks as generative AI is capable of writing malicious code or acting as a sidekick to the human hacker writing malicious code. To level the playing field, the best defense will also be self-learning, generative AI tools. The downloads for Chat-GPT have plateaued considerably among consumers. Meanwhile, the use of Chat-GPT among hackers is rising on an exponential curve. This helps illustrate why the adoption curve for AI may be healthier among enterprises (rather than consumers) in the medium-term.

According to Mackenzie Jackson, a developer advocate with GitGuardian, Chat-GPT is likely to give rise to a greater number of hackers. This new generation is called “AI Hackers” because previously they could not hack on their own, but are now able to hack with generative AI as their sidekick.

Generative AI used for nefarious purposes

Source: RAPID7: BAIN & COMPANY

Every Thursday at 4:30 pm Eastern, the I/O Fund team holds a webinar for premium members to discuss how to navigate the broad market, as well as various stock entries and exits. We offer trade alerts plus an automated hedging signal. The I/O Fund team is one of the only audited portfolios available to individual investors. Learn more here.

What the C-Suite is Saying About AI & Cybersecurity

McKinsey released a recent report where 53 percent of organizations believe generative-AI is driving new risks in cybersecurity. Not only can AI help enterprises expedite threat detection, but hackers can also expedite the end-to-end attack life cycle. In another survey, 38 percent of enterprises stated they are mitigating AI-related cybersecurity risks compared to 32 percent who are mitigating inaccuracies, indicating cybersecurity is the top risk that is AI-related at this time.

According to Forbes, 56% of enterprises ranked governance, security and auditability issues as their highest-priority concern with AI/ML spend. This survey was completed in 2021, and it’s likely this number is higher today.

What Public Company CEOs are Saying

Microsoft has one of the largest cybersecurity businesses in the world at $20 billion. This is larger than six best-of-breed companies combined. The company has been working for years on new automation features called CoPilot, which was released to the public this month. Although it’s being marketed for Windows, Office 365 and the browsers Bing and Edge, yet will also become an AI companion for it’s cybersecurity business. Per the CEO in the most recent earnings call: “our Security Copilot, the first product to apply this next generation of AI to SecOps will be available to customers via paid early access program this fall.”

Beth Kindig Twitter Post

Source: BETH KINDIG'S TWITTER

Palo Alto Networks is a company that has outsized returns this year of up to 78% following the most recent earnings call. It’s currently trading at 66% gains YTD. The CEO stated in the most recent earnings call: “I think what's important to understand is that over the last five years, cybersecurity TAM has continued to rise. It has grown at approximately 14%, and it has grown twice the pace at which the IT market has grown […] and possibly now with the sort of arrival of AI as a mainstream opportunity, every one of us is trying to make sure we grab that with both hands. So, we will continue to see the pace of technology spend go sort of up or forward.”

Palo Alto Price Change

Source: YCHARTS

Cloudflare is a stock that is up 35% YTD and is edging out the Nasdaq-100 this year, which is no small feat given the rally Big Tech has seen. The CEO recently stated that his company is seeing an uptick in business on their R2 product: “And by our estimates, Cloudflare is the most commonly used cloud provider across the leading AI startups. They're using R2 to help arbitrage the lowest GPU cost to train their models.”

Conclusion:

Using AI to identify threats and for pattern recognition and anomaly detection is not new by any means. Rather what is rapidly coming to market are platforms enabled with generative AI and automation that is self-learning, so that a threat is detected before it occurs rather than after the cyberattack. Rather than threat detection, the ultimate goal is threat prevention.

AI will not entirely replace security professionals anytime soon, but it can contribute to efficiency by automating threat detection, analyzing data sets, and by continuously learning to identify anomalies and new attacks before they occur. By offering agentless solutions, theoretically, fewer human agents will be needed. For new technologies, the adoption curve can be challenging (go ask virtual reality enthusiasts how that’s going). But for industries where AI can offer a value proposition that can predictably lower costs at a reasonable price, a market will form. We think one of the next markets to be disrupted by AI will be cybersecurity.

If you own cybersecurity stocks, or are looking to own cybersecurity stocks, we encourage you to attend our weekly premium webinars, held every Thursday at 5:00 pm EST. Next week, we will discuss a cybersecurity stock we recently entered and one that we are eyeing closely – what our targets are, where we plan to buy, as well as where we plan to take gains.

I/O Fund Equity analyst, Royston Roche, contributed to this analysis.

Recommended Reading:

head bg

More To Explore

Newsletter

Robinhood crypto trading volume vs. transaction revenue Q2 2025

Robinhood Stock: Spot Crypto Volumes May Lead to Incoming Volatility

Robinhood’s fundamental transformation over the past two years has been nothing short of remarkable. Crypto is driving strong revenue growth at 50% YoY in Q1, while TTM operating margin is approaching

July 11, 2025
Beth Kindig, Lead Tech Analyst at I/O Fund, interviewed on Fox Business discussing Nvidia’s earnings beat and solid guidance.

AI Stocks in 2025: What Every Investor Should Know

The market evolves quickly, and nowhere is that more apparent than in AI stocks, which continue to lead in both innovation and returns. At the I/O Fund, our deep coverage of AI stocks, combined with a

July 03, 2025
Modern data center building next to a nuclear power plant cooling tower.

Nuclear Power Emerging as a Clean AI Data Center Energy Source

Data center power demand is forecast to surge over the next decade, with some estimates seeing demand increasing 3x by 2030. Inference is expected to be a primary driver with power demand growth proje

June 27, 2025
Nvidia vs. AMD CEOs in AI GPU race, spotlighting AI inference competition.

AMD vs Nvidia: The AI Stock That Could Win by 2028

Last week, AMD offered more details on the release of their groundbreaking GPUs with little fanfare in the markets – which is par for the course as AMD has a history of being forgotten about until the

June 20, 2025
AI chip powering data growth with green upward graph, symbolizing semiconductor and AI market expansion

This AI Stock is Set to Surge from Inference Demand

Up until now, the AI conversation has been dominated by training and compute, yet inference is showing signs of exploding growth. Microsoft and Google recently highlighted 5x to 9x YoY growth in AI to

June 13, 2025
Taiwan Semiconductor drives AI growth amid geopolitical risk

Taiwan Semiconductor Stock: AI Growth Amid Geopolitical Risk 

Despite their leadership, AI stocks like Taiwan Semiconductor and Nvidia are flat year-to-date and trading at similar levels as June 2024. Clearly, the AI trade is not as straightforward as it might s

June 06, 2025
Man walks on a broken bridge with a stock chart overlay, symbolizing market challenges

Historic Market Uncertainty Meets $7 Trillion Debt Wall: What Comes Next for the S&P 500

We are seeing mounting evidence that this bounce may be the start of a new push to all-time highs, such as improved breadth, better than expected earnings plus the size of this bounce. However, one ca

May 27, 2025
a baseball stadium with Nvidia billboard

Nvidia Stock Faces a Choppy Q2, But Tailwinds Build for H2 Acceleration

Nvidia’s streak of blockbuster earnings has turned investor expectations into a high-stakes game— anything short of perfection risks disappointment. As the company gears up to report fiscal Q1 results

May 23, 2025
Microsoft stock up as Azure tops AWS, Google Cloud in Q3 2025

Microsoft Stock Surges After Q3 2025 Earnings: What Separates Azure from AWS, Google Cloud

Microsoft stock jumped after Q3 2025 earnings as Azure emerged as the only major cloud platform to accelerate growth this quarter — a rare feat amid macro pressures. Azure’s 35% constant currency grow

May 16, 2025
Bitcoin price chart signaling potential top despite favorable crypto news

Why Bitcoin’s Bull Run May Be Nearing a Top Despite Pro-Crypto Tailwinds

Since calling the Bitcoin bottom near $16,000 in late 2022, the I/O Fund has maintained a disciplined, contrarian approach — issuing 13 buy alerts before Bitcoin surged above $100,000. Now, signs sugg

May 09, 2025
newsletter

Sign up for Analysis on
the Best Tech Stocks

https://bethtechnology.cdn.prismic.io/bethtechnology/e0a8f1ff-95b9-432c-a819-369b491ce051_Logo_Final_Transparent_IOFUND.svg
The I/O Fund specializes in tech growth stocks and offers in-depth research for Premium Members. Investors get access to a transparent portfolio, a forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks


Copyright © 2010 - 2025