The artificial intelligence trade may be broadening beyond chips and servers, with cybersecurity emerging as one of the biggest secondary beneficiaries. A sharp rally in cybersecurity stocks on Tuesday suggested investors increasingly view security spending as a necessary companion to AI adoption rather than a competing budget item. Cybersecurity ETFs were quick to reflect the sentiment, rallying sharply Tuesday after IBM Corp. (IBM) suggested enterprise customers continue to prioritize cybersecurity spending even as they ramp up investments in AI infrastructure, reinforcing the view that security remains a key beneficiary of the artificial intelligence boom.

CrowdStrike Holdings Inc. (CRWD) surged more than 11%, while Okta Inc. (OKTA) and Palo Alto Networks Inc. (PANW) also posted strong gains of 10% and 7% respectively. Meanwhile, Fortinet Inc. (FTNT) also was up more than 3%.

Major cybersecurity ETFs surged on Tuesday, outperforming the broader market. The Global X Cybersecurity ETF (BUG) climbed more than 6%, the First Trust NASDAQ Cybersecurity ETF (CIBR) jumped 3%, and the Amplify Cybersecurity ETF (HACK) surged more than 4%.

The catalyst came from IBM's latest earnings commentary. CEO Arvind Krishna said enterprise customers shifted capital spending toward servers, storage and memory to secure supply-constrained AI infrastructure ahead of expected price increases. At the same time, he said “rapidly evolving, industry-wide cybersecurity concerns” remained a key area of customer focus.

The remarks reassured investors that cybersecurity is proving resilient even as companies devote billions of dollars to building AI infrastructure. Rather than replacing security budgets, the rapid deployment of AI appears to be expanding them.

AI Is Creating More Work for Cybersecurity

The relationship between AI and cybersecurity has evolved rapidly over the past year.

As companies roll out generative AI tools and autonomous AI agents across their operations, they face a growing need to secure AI models, protect sensitive data, verify machine identities and defend against increasingly sophisticated cyberattacks. Security vendors are also embedding AI into their own platforms to improve threat detection and automate incident response.

That has helped shift the investment narrative. Instead of viewing cybersecurity as a traditional software segment vulnerable to AI-driven disruption, investors are increasingly treating it as one of AI's structural beneficiaries.

CrowdStrike, one of the largest holdings across several cybersecurity ETFs, has gained more than 80% year to date, reflecting optimism that AI adoption is increasing demand for cloud-native security platforms.

Cybersecurity ETFs Stand to Benefit

Tuesday's rally extended across several cybersecurity-focused ETFs.

Global X Cybersecurity ETF (BUG), one of the day's best-performing thematic funds, gained more than 6%. The ETF tracks companies that derive a significant portion of their revenue from cybersecurity, with major holdings including CrowdStrike, Palo Alto Networks, Fortinet, and Okta. Its pure-play approach makes it a direct way to invest in the sector's growth.

The First Trust NASDAQ Cybersecurity ETF (CIBR), one of the largest cybersecurity ETFs by assets, provides broader exposure to established cybersecurity leaders and infrastructure providers. Alongside CrowdStrike, Palo Alto Networks and Fortinet, the fund also holds companies such as Broadcom, Inc. (AVGO), Cisco Systems Inc. (CSCO) and Check Point Software Technologies Ltd. (CHKP), giving investors a mix of software and hardware-based security businesses.

The ETFMG Prime Cyber Security ETF (HACK), the first cybersecurity ETF launched in the U.S., combines software vendors with networking and infrastructure companies that enable enterprise cyber defense. Its portfolio includes CrowdStrike, Cisco, Palo Alto Networks, Fortinet, and Leidos Holdings Inc. (LDOS), offering diversified exposure across the cybersecurity ecosystem.

For investors seeking a more concentrated portfolio, the WisdomTree Cybersecurity Fund (WCBR) focuses on companies generating a substantial share of their revenue from cybersecurity products and services. The equal-weight strategy reduces concentration in mega-cap names and provides greater exposure to mid-cap innovators such as SentinelOne Inc. (S), CyberArk Software (CYBR), Cloudflare Inc. (NET), and Zscaler Inc. (ZS).

The AI Trade May Be Expanding

Much of this year's AI rally has centered on semiconductor and infrastructure ETFs, including the VanEck Semiconductor ETF (SMH) and the iShares Semiconductor ETF (SOXX), as investors poured money into companies supplying GPUs, memory chips and networking equipment.

IBM's comments suggest the next phase of the AI investment cycle may be broader. As enterprises invest in AI infrastructure, they also appear willing to protect those investments with increased spending on cybersecurity.

For ETF investors, that could strengthen the case for looking beyond chipmakers. If AI deployment continues to accelerate across enterprises, cybersecurity ETFs may become an increasingly important way to gain exposure to the next leg of the AI ecosystem, where protecting AI systems becomes just as critical as building them.