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The Cybersecurity Investment Landscape in the Wake of Russian Aggression
When Russia invaded Ukraine on February 24, 2022, it constituted the largest assault in Europe since World War II. While Ukrainian military and civilian forces on the ground defend against Russian violence, others are defending Ukraine from cyber attacks behind closed doors. Sanctions imposed on Russia by the United States and European Union have since been accompanied by direct military aid and cybersecurity support to Ukrainians. This historic assault is being met with an equally historic response, particularly among EU nations.
Countries throughout the EU are responding by increasing their defense spending significantly. German Chancellor Olaf Sholz intends to increase defense spending by half a percentage point of GDP, from 1.5% to 2%. This increase is equivalent to just over $100 billion of additional spending annually. Denmark also intends to increase its military spending over the next few years.
Alongside Germany, the Netherlands and Estonia are sending military weapons to Ukraine as well. Many other European countries, including Greece, Italy, France, and Belgium, are committing military resources and invoking no-fly-zones to support Ukraine. The West is certainly ramping up its defense systems.
A significant component of defense is, of course, cybersecurity, particularly in the context of a Russian offensive. Various cybersecurity tactics have already been used to undermine Ukraine, from the creation of a false video of surrender to rudimentary cyberattacks on Ukrainian banks and government websites. Cyberwarfare is a known tactic of the Russian government, especially since its cyberattacks on Ukraine’s power grid in 2015 followed by a malware attack in 2017.
Government investment in cybersecurity increased in the US and EU after those aforementioned Russian cyberattacks, and the same trend is happening again now. On one hand, countries (and private companies like Google and Microsoft) are investing in cybersecurity to assist Ukraine. Simultaneously, countries are investing in their own cybersecurity systems for national defense purposes.
While the US and EU are not currently under threat of physical attack by Russia, the sanctions they put in place against Russia have left them with a sudden and forced energy independence after the Russian supply of gas and oil was cut off. This independence leaves them momentarily more vulnerable with much less wiggle room and much more to lose if their energy grids and security systems were to be subjected to a cyberattack.
As cyber innovations and opportunities for cyberattacks expand, cybersecurity is becoming one of the most important forms of defense. The aftermath of a cyberattack does not just cause financial and infrastructural inconveniences, but can lead to fatalities directly and indirectly. While conflict rages in Ukraine, defense contractors and cybersecurity software companies have not surprisingly seen increases in stock prices as a result of their increased significance in an evolving geopolitical landscape.
Zscaler, a cloud security company, and Crowdstrike Holdings, a cybersecurity technology company, are two of several such companies with promising upward stock trends as a result of the escalating conflict in Ukraine. Crowdstrike, for example, is up 24.8% over the past month. Both companies are key holdings in TrueShares’ AI and Deep Learning ETF (LRNZ). For a full list of holdings please visit truesharesetfs.com/lrnz. Because many countries are just now voicing intentions of ramping up military spending, now is a great time to invest in cybersecurity before the bulk of the purchasing begins. Gaining congressional approval and building up a military and cybersecurity system takes time, after all.
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