In August, the Biden administration introduced the AI Cyber Challenge, aiming to leverage AI to enhance and safeguard critical U.S. infrastructure from cyber threats using artificial intelligence.
This initiative, run through the Defense Advanced Research Projects Agency (DARPA), offers up to $20 million in prizes. It has garnered support from prominent AI companies such as Anthropic, Google, Microsoft, and OpenAI, which will contribute their technology to the competition.
Qualifiers are set for Spring 2024, followed by semi-finals at DEF CON 2024, where up to five top-scoring teams will each win $2 million and proceed to the final round at DEF CON 2025. The finals include a $4 million top prize for the team that provides the best security solution for essential software. All competitors will be required to open source their systems, promoting widespread use of their solutions.1
The announcement of this contest comes at the same time that the White House issued orders for federal agencies to strengthen their cybersecurity efforts and address shortcomings in implementing a 2021 executive order aimed at enhancing national cybersecurity. By the end of June, multiple federal departments and agencies had yet to fully adhere to critical security measures outlined in the executive order. National security adviser Jake Sullivan emphasized that this non-compliance exposed the U.S. government to cyber threats and eroded its role as a cybersecurity model.
Sullivan’s memo, directed to Cabinet secretaries, called on various departments (excluding the Pentagon) to be fully compliant with the executive order’s security requirements by year-end. Furthermore, agencies were required to submit a detailed implementation plan by the end of September.2
Updates on Specific Companies
Okta, Inc. has unveiled Okta for Global 2000, a ground-breaking solution tailored to provide the largest organizations with the flexibility and automation required for managing their identity systems. Okta for Global 2000 addresses the intricate balance between centralization and decentralization within these organizations while maintaining stringent security measures and operational efficiency.
The complex technological needs of the Global 2000 demand an automated and neutral identity technology that adapts to their business strategies rather than confines them to a single platform. Okta for Global 2000 empowers executives with the technical ability to transition between centralizing users, decentralizing business elements for independent management, or delivering a hybrid model based on company needs.
Key features include flexible user management, automated identity actions, delegated control and autonomy, and seamless user experiences. Okta for Global 2000 also enables the integration of existing identity providers for acquisitions or subsidiaries without disrupting end-user experiences.3
This announcement comes at the same time Okta released Q2 financial results. For the quarter, total revenue was $556 million (up 23% year-over-year) and subscription revenue was $542 million (up 24% year-over-year).4
CrowdStrike Holdings, Inc.
CrowdStrike Holdings Inc. crushed earnings with performance driven by the momentum of AI. In the second quarter, CrowdStrike achieved a net income of $8.48 million, a significant turnaround from the $49 million loss in the previous quarter. Revenue surged by an impressive $200 million during this period, surpassing analyst predictions. Demonstrating their confidence, the company also raised its guidance to an impressive $3.04 billion.
At the core of CrowdStrike’s success is its AI-powered Falcon platform, which made its debut in 2013. This cutting-edge technology meticulously monitors and analyzes trillions of data points, safeguarding over 23,000 clients from potential security breaches. CEO George Kurtz attributes much of their revenue growth to this powerful platform. Notably, the Falcon platform contributed a substantial “well over” $500 million in recurring revenue, underscoring the undeniable effectiveness of AI in the realm of cybersecurity.
Varonis Systems Inc
Varonis Systems, Inc. has opened its first data center in the United Kingdom, situated in London, to support customers transitioning to Varonis’ SaaS (Software-as-a-Service) offering. This expansion aims to assist Varonis customers in achieving automated data security outcomes while adhering to U.K. data privacy regulations.
The new U.K. data center serves a dual purpose. Firstly, it enables Varonis customers to demonstrate compliance with national data protection laws, particularly the Data Protection Act, which governs the use of personal information by organizations, businesses, and government entities in the U.K. Secondly, it caters to the growing demand in the U.K., where many organizations must also adhere to the European Union’s General Data Protection Regulation (GDPR).
Customers, including hospitals, government departments, and businesses securing employee and customer Personally Identifiable Information (PII), will benefit from the ability to store data logs and analytics locally. Varonis’ comprehensive data visibility and automation capabilities will assist customers in ensuring responsible use of sensitive data.5
CYBR ETF: Diversified Investing in Cybersecurity
A cybersecurity ETF offers a great alternative to gaining exposure to this industry without being locked into any single security, and without the hassle of hand-picking individual stocks. ETFs allow you to diversify by investing in multiple companies in multiple markets, ensuring that a single market shock won’t tank your portfolio.
Canada’s first cybersecurity ETF, Evolve Cyber Security Index Fund (TSX Ticker: CYBR), invests in global companies involved in the cyber security industry. For more information, visit the fund page here: https://evolveetfs.com/cybr/.
Portfolio Strategy and Activity
For the month, Okta Inc made the largest contribution to the Fund, followed by Qualys Inc and Varonis Systems Inc. The largest detractors to performance for the month were Fortinet Inc, followed by Booz Allen Hamilton Holding Corp and Trend Micro Inc.
- Feiner, L., “Hackers to compete for nearly $20 million in prizes by using A.I. for cybersecurity, Biden administration announces,” CNBC, August 9, 2023; https://www.cnbc.com/2023/08/09/biden-admin-launches-hacking-challenge-to-use-ai-for-cybersecurity.html
- Alvarez, P. & Lyngaas, S., “White House orders federal agencies to shore up cybersecurity, warns of potential exposure,” CNN, August 16, 2023; https://www.cnn.com/2023/08/16/politics/jake-sullivan-cybersecurity-warning/index.html
- “Introducing Okta for Global 2000: Identity Solution to Give CEOs and Board of Directors Flexibility to Centralize or Decentralize their Business Strategy,” Okta, August 29, 2023; https://investor.okta.com/news-releases/news-release-details/introducing-okta-global-2000-identity-solution-give-ceos-and
- “Okta Announces Second Quarter Fiscal Year 2024 Financial Results,” Okta, August 30, 2023; https://investor.okta.com/news-releases/news-release-details/okta-announces-second-quarter-fiscal-year-2024-financial-results
- “Varonis Opens UK Data Center to Support SaaS Customers,” Varonis, August 29, 2023; https://ir.varonis.com/news-and-events/press-releases/press-release-details/2023/Varonis-Opens-UK-Data-Center-to-Support-SaaS-Customers/default.aspx