Cybersecurity remains one of the more attractive areas within information technology because it addresses a need that businesses simply cannot afford to ignore.

In a weaker economic environment, companies may delay software upgrades, reduce consulting expenditures, or slow hiring. What they generally do not do is stop protecting their networks, cloud infrastructure, customer data, and internal systems. That dynamic makes cybersecurity exceptionally attractive.

Despite favourable long-term fundamentals, cybersecurity stocks have often traded alongside the broader software sector, which has faced pressure over the past year.

In April, industry leaders Palo Alto Networks and CrowdStrike were both down more than 30 per cent from their prior highs and have yet to fully recover, even as broader equity markets recently reached new highs.

The long-term investment case remains straightforward. As businesses migrate more infrastructure to the cloud, connect more devices, expand remote access, and automate additional workflows, the number of potential entry points for cyberattacks continues to grow.

Every new application, API, employee device, or AI-enabled tool increases the overall attack surface. That rising complexity benefits cybersecurity providers capable of protecting systems at scale, detecting threats quickly, and automating response functions. Put simply, the more digital the global economy becomes, the more essential cybersecurity becomes alongside it.

More recently, investor concerns have centred on artificial intelligence. The concern is that increasingly sophisticated AI tools could disrupt traditional cybersecurity vendors by automating functions that previously required specialised software or by lowering barriers to entry for new competitors.

While those concerns are not entirely unfounded, they do not necessarily imply that the cybersecurity sector itself faces structural decline.

In many respects, the stronger argument is the opposite. AI is not reducing cyber risk; it is accelerating it. Threat actors can now use AI to craft more convincing phishing campaigns, identify vulnerabilities more efficiently, generate malware faster, and adapt to attacks in real time.

As cyberthreats become more scalable, less expensive, and more sophisticated, companies are unlikely to reduce spending on defence. If anything, they are likely to increase it while demanding more capable and integrated solutions.

Viewed through that lens, AI is better understood as a competitive filter than as an existential threat. Narrow point solutions may face pricing pressure or commoditisation over time, while stronger platforms with broad product offerings, proprietary data, and meaningful automation capabilities may strengthen their competitive positions.

The likely long-term winners are firms that can secure cloud environments, manage identity, monitor endpoints, and respond to threats through unified platforms. In cybersecurity, scale, breadth, and speed matter, and AI arguably increases the value of those advantages.

Another attractive characteristic of many cybersecurity companies is the underlying business model. A significant portion of the industry operates on subscription-based revenue models that generate recurring revenue and high customer retention.

These businesses also tend to benefit from substantial switching costs. Once a large enterprise builds its security infrastructure around a particular provider, changing vendors can be operationally disruptive, expensive, and potentially risky. That creates a degree of customer stickiness and economic moat that many other software businesses lack.

Not every cybersecurity stock represents an attractive investment opportunity. Valuation discipline still matters, and some companies will inevitably overpromise on AI-related capabilities while underdelivering operationally. Nevertheless, as a long-term investment theme, cybersecurity remains compelling because it is tied to a permanent and growing necessity rather than a temporary trend.

AI may reshape large portions of the software industry, but it is far more likely to increase demand for cybersecurity than to diminish it. For long-term investors, that remains the key point: in an increasingly automated and connected world, security does not become optional. It becomes foundational infrastructure.

• Bryan Dooley, CFA, is the chief investment officer at LOM Asset Management Ltd in Bermuda. Please contact LOM at +1 441-292-5000 or visit www.lom.com for further information. This communication is for information purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. Readers should consult with their brokers if such information and or opinions would be in their best interest when making investment decisions. LOM is licensed to conduct investment business by the Bermuda Monetary Authority