Scammers in Hong Kong just pulled off the heist of the century...
Earlier this month, fraudsters posed as the chief financial officer ("CFO") of a locally based multinational company. They then invited one of the company's finance workers to video chat about some "transactions" he would need to make.
The employee was suspicious at first. But the call changed his mind... The CFO was present during the video call to reassure him, along with several of his other coworkers.
Everything seemed normal. And everyone on the call looked and sounded like his colleagues. So the worker followed their instructions and transferred the cash...
His mistake cost the company $25.6 million.
As it turns out, the employee was the only real person on the call. Everyone else was a computer-generated puppet.
The attendees were all "deepfakes" – phony representations of real people created by artificial intelligence ("AI").
AI advancements are kick-starting a new wave of crime. Companies need to evolve to deal with these threats. And that spells massive opportunity for the cybersecurity sector...
If you aren't worried about deepfakes yet, you should be.
Criminals can misuse deepfakes in many ways. Here are a few examples from just the past month...
- During the New Hampshire primary for the 2024 election, a deepfake of President Joe Biden's voice phoned locals and discouraged them from voting.
- A deepfake of Bollywood star Akshay Kumar promoted an app without his knowledge.
- Explicit deepfake videos of Taylor Swift got millions of views on X (formerly Twitter).
- A deepfake of Anatoly Yakovenko, co-founder of blockchain platform Solana, promoted a cryptocurrency scam.
We can add the heist in Hong Kong to the growing list of cybersecurity attacks in 2024.
Deepfakes are dangerous for many reasons. From what we've seen so far, they can steal identities and cause reputational damage. They can wreak financial havoc. And these incidents are growing more commonplace...
Data from verification platform Sumsub showed a 10 times increase in deepfakes from 2022 to 2023. And data from biometric firm iProov showed a further 704% surge in deepfake attacks from the first to the second half of 2023.
The abuse of AI is a big threat to progress... But it will also drive demand for better security solutions.
Over time, it will lead to massive investment and innovation in the cybersecurity sector.
It's too early to know which companies will profit most from combating this new era of cybercrime. The largest names in the sector are likely to do well – companies like CrowdStrike (CRWD), Cloudflare (NET), and Fortinet (FTNT).
But you can cast a wider net by buying a cybersecurity exchange-traded fund ("ETF")...
Unlike single stocks, ETFs hold many companies with a common theme. They're a "one-stop shop" style of investing. You don't have to place all your chips on a single company... Instead, you can spread out your risk by investing in the overall sector.
The First Trust Nasdaq Cybersecurity Fund (CIBR) and the Amplify Cybersecurity Fund (HACK) both track the biggest cybersecurity companies. These ETFs provide exposure to the broad tailwinds in the space.
Online crime is surging at an unbelievable pace. And deepfakes will bring new challenges we've never seen before.
Businesses and consumers alike will be forced to adapt or perish... And for the companies that secure our digital lives, that's a powerful setup for long-term growth.
Good investing,
Sean Michael Cummings
Further Reading
Biotech stocks struggled to gain ground for most of 2023. But recently, the sector has snapped back. According to history, investors should be on the watch for an even bigger breakout in this boom-and-bust sector... Read more here.
"Chip stocks have become one of the best-performing corners in the market," Vic Lederman writes. Semiconductor demand has soared in recent years. And demand will only continue to grow in the future. Here's one way to take advantage of this trend... Learn more here.
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