Under the previous Trump administration, military spending reached record highs, with a significant portion allocated to increased funding for defence initiatives, including cybersecurity.¹ Trump’s emphasis on securing critical infrastructure and countering foreign cyber threats during his time in office created an environment conducive to growth in the cybersecurity sector, particularly among companies aligned with defence priorities.

Now, with Trump’s return to the White House, geopolitical tensions—particularly with adversaries like China, Russia, and Iran—have only heightened the urgency for advanced cyber defences. In response, cybersecurity stocks have emerged as a key area of interest for investors seeking exposure to this expanding market.

Can cybersecurity stocks expect to benefit from shifts in government policy and defence priorities under Trump 2.0? As the new administration redefines its approach to cybersecurity in a changing global landscape, let’s assess how these shifts could provide a sustainable tailwind for the sector.

Cybersecurity in Trump’s First Term

During his first term, President Donald Trump prioritized cybersecurity as a critical component of national security, aligning it with broader defence and infrastructure goals.

In 2017, he issued an executive order calling for comprehensive cybersecurity modernization across federal agencies. This directive aimed to address vulnerabilities within the U.S. government’s digital infrastructure, reflecting growing concerns over cyberattacks by foreign actors that could compromise national security.²

Trump issued America’s first cybersecurity strategy in more than fifteen years when, in September 2018, his White House released the National Cyber Strategy, which prioritized defending the United States by protecting networks, systems, functions, and data.³ Later that same year, Trump signed into law the Cybersecurity and Infrastructure Security Agency Act, which founded the Cybersecurity and Infrastructure Security Agency (CISA). This move formalized the U.S. government’s commitment to defending critical infrastructure from increasing cyber threats.⁴

However, the question remains whether Trump’s return to the presidency will continue these policies or introduce shifts in priorities, particularly in terms of funding and regulatory oversight.

Likely Policies in the New Administration

Cybersecurity is expected to remain a high priority for the President-elect, particularly given escalating geopolitical tensions. Trump’s national security policies and his stance on defence spending suggest that cybersecurity firms could see increased demand as both the public and private sectors prepare for heightened cyber threats.

A key aspect of Trump’s anticipated cybersecurity policy is reducing regulatory oversight, particularly for the private sector. Such an agenda aligns with his historical preference for a business-friendly environment that minimizes federal intervention. As a result, cybersecurity regulations—already voluntary in many sectors—could be further eased.⁵

While this may reduce the burden of mandatory compliance guidelines on businesses, given the rising threat landscape, many companies may still be incentivized to invest in cybersecurity to protect against the increasing frequency of cyberattacks and sophistication of hackers.⁶

Tensions with China over trade, tariffs, and issues such as Taiwan’s sovereignty, as well as with geopolitical friction with Iran and Russia—both of which have used cyber tactics in recent conflicts—will likely lead to a more aggressive stance on defending critical infrastructure from foreign actors. As these new threats emerge, the cybersecurity sector, particularly companies focused on infrastructure protection, will likely benefit from increased government demand, as both public agencies and private enterprises look to shore up defences in anticipation of evolving risks.⁷

For cybersecurity stocks, this presents a potential tailwind. As private sector companies seek to bolster their defences against rising cyber threats, particularly from state actors like China, Russia, and Iran, they will increasingly turn to third-party cybersecurity firms. This trend is expected to bolster the market for cybersecurity solutions, especially those focused on critical infrastructure protection. As the U.S. government continues to rely on private companies to secure vital sectors such as energy, finance, and telecommunications, cybersecurity providers could see a notable uptick in government contracts, particularly in areas aligned with national security and defence.¹¹

Additionally, military spending under the Trump administration will likely benefit cybersecurity stocks with strong ties to defence contractors. As part of its emphasis on military readiness, the incoming administration is expected to prioritize cyber defence initiatives as integral to national security. This focus on cyber warfare and defence against cyber threats presents significant growth opportunities for companies specializing in cybersecurity, especially those that offer solutions to counter foreign adversaries’ cyber activities. As military and defence spending remains elevated, companies in this space are well-positioned to see increased demand for cybersecurity products and services, creating a positive shift for stocks aligned with defence and national security objectives.¹²

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 cybersecurity industry. For more information, visit the fund page here: https://evolveetfs.com/cybr/.

 

ENDNOTES

  1. Corbett, J., “Led by US Under Trump, Global Military Spending Soared to Highest Level in Recorded History Last Year,” Common Dreams, April 29, 2019; https://www.commondreams.org/news/2019/04/29/led-us-under-trump-global-military-spending-soared-highest-level-recorded-history
  2. “Executive Order on Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure,” Cybersecurity & Infrastructure Security Agency (CISA), n.d.; https://www.cisa.gov/topics/cybersecurity-best-practices/executive-order-strengthening-cybersecurity-federal-networks-and-critical-infrastructure
  3. “National Cyber Strategy of the United States of America,” Trump White House Archives, September 2018; https://trumpwhitehouse.archives.gov/wp-content/uploads/2018/09/National-Cyber-Strategy.pdf
  4. “Cybersecurity and Infrastructure Security Agency,” Cybersecurity & Infrastructure Security Agency (CISA), November 20, 2018; https://www.cisa.gov/news-events/alerts/2018/11/19/cybersecurity-and-infrastructure-security-agency
  5. Pattison-Gordon, J., “Cybersecurity and Critical Infrastructure: What to Expect Under Trump,” Governing, December 2, 2024; https://www.governing.com/artificial-intelligence/cybersecurity-and-critical-infrastructure-what-to-expect-under-trump
  6. Lemos, R., “Trump 2.0 May Mean Fewer Cybersecurity Regs, Shift in Threats,” Dark Reading, November 15, 2024; https://www.darkreading.com/cloud-security/trump-20-mean-cybersecurity-regs-shift-threats
  7. Stewart, P., “US needs to do more make cyber attackers pay, Trump adviser says,” Reuters, December 15, 2024; https://www.reuters.com/technology/cybersecurity/us-needs-do-more-make-cyber-attackers-pay-trump-adviser-says-2024-12-15/
  8. DiMolfetta, D., “Will cyber suffer under Trump’s goal to slash federal budgets?,” Nextgov/FCW, November 7, 2024; https://www.nextgov.com/cybersecurity/2024/11/will-cyber-suffer-under-trumps-goal-slash-federal-budgets/400905/
  9. Holmes, F., “How Trump’s Second Term Could Impact Defence and Cybersecurity Spending,” U.S. Global Investors, November 15, 2024; https://www.usfunds.com/resource/how-trumps-second-term-could-impact-defence-and-cybersecurity-spending/
  10. Pell, S.K., “Trump 2.0: What cybersecurity shifts lie ahead?,” Brookings, December 9, 2024; https://www.brookings.edu/articles/trump-2-0-what-cybersecurity-shifts-lie-ahead/
  11. Holmes, F., “How Trump’s Second Term Could Impact Defence and Cybersecurity Spending,” U.S. Global Investors, November 15, 2024; https://www.usfunds.com/resource/how-trumps-second-term-could-impact-defence-and-cybersecurity-spending/
  12. Pattison-Gordon, J., “Cybersecurity and Critical Infrastructure: What to Expect Under Trump,” Governing, December 2, 2024; https://www.governing.com/artificial-intelligence/cybersecurity-and-critical-infrastructure-what-to-expect-under-trump

Source: Getty Images CreditGreggory DiSalva

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