According to a report by 24/7 Wall St., the First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) experienced a gain of approximately 13 percent in 2025. However, this still fell short of the Nasdaq-100 by nearly 7 percentage points. This underperformance occurs at a time when AI-driven threats are anticipated to create an unprecedented demand for cybersecurity solutions in 2026, presenting a unique investment opportunity.
Cybersecurity Ventures forecasts that global expenditure on security products and services will surpass $520 billion by 2026, a significant increase from $260 billion in 2021. This growth is largely attributed to what Harvard Business Review refers to as a “surge in AI agent attacks.” In these situations, adversaries exploit the confusion surrounding identity due to deepfakes and synthetic identities, which can manipulate automated systems in real time.
Investors should pay close attention to the quarterly earnings calls of CIBR’s largest holdings. Companies like Palo Alto Networks, CrowdStrike (NASDAQ:CRWD), and Cloudflare (NYSE:NET) make up nearly 20 percent of the ETF's portfolio. Their insights regarding AI security spending will be critical indicators of whether enterprise budgets are shifting towards enhanced defensive measures. Revenue growth exceeding 25 percent from these firms would support the notion that 2026 will be a pivotal year in cybersecurity.
With $11.1 billion in assets, CIBR is five times larger than its competitor HACK, offering superior liquidity. The fund comprises 36 holdings, providing a broader diversification compared to pure-play alternatives. This includes exposure to defense contractors such as Leidos (NYSE:LDOS) and Booz Allen Hamilton (NYSE:BAH), which benefit from government cybersecurity budgets. With federal spending on cyber defense exceeding $25 billion annually, and increasing due to rising nation-state threats, the potential for growth remains strong.
