SPX3,785.38-33.45 -0.88%
DIA308.13-1.92 -0.62%
IXIC11,028.74-149.16 -1.33%

Could The Metaverse Spark A Monumental Price Rally For Cybersecurity Stocks?

As talk of the metaverse intensifies, we can see a greater emphasis being placed on the stocks that are likely to play a key role in powering the brave new digital frontier. This invariably includes cybersecurity firms that are set to keep individuals secu...

Benzinga · 06/09/2022 14:14

As talk of the metaverse intensifies, we can see a greater emphasis being placed on the stocks that are likely to play a key role in powering the brave new digital frontier. This invariably includes cybersecurity firms that are set to keep individuals secure in a massively interconnected online environment. 

“Metaverses will affect almost every industry on the planet. Regardless of what you do for a living, it's likely that this technology will find applications in your field in the future,” explained Maxim Manturov, head of investment research at Freedom Finance Europe. 

“Emergen Research analysts predict the metaverse market will grow to $829bn by 2028 and Bloomberg Intelligence analysts predict it will reach $800bn by 2024. Morgan Stanley estimates China's metaverse market could be worth 52 trillion Renminbi (about $8 trillion) in the coming years,” Manturov added.

As emerging technologies begin to make the metaverse a reality, the role of cybersecurity firms working to ensure that personal data is protected at all times in a brand new online environment will gain more global recognition. 

We can already see a tussle emerging between leading cybersecurity stocks as metaverse interest helps to deliver upticks in performance whilst inflation-driven investor sell-offs continue to keep share prices grounded. 

As the chart above shows, Fortinet (NASDAQ:FTNT) has displayed a quick uptick in performance, showing gains of 73% over the course of the past 12 months, whilst Zscaler (NASDAQ:ZS) and CrowdStrike (NASDAQ:CRWD) have rebounded well in recent weeks. 

Whilst the recent upturn in fortunes for cybersecurity stocks may be influenced by investor interest in metaverse stocks, it’s likely that geopolitical tensions emerging from Eastern Europe also played a key role.  

However, as the aforementioned metaverse growth predictions show, the cybersecurity firms that offer the greatest coverage for the market can reap some extraordinary rewards in terms of revenue. 

Identity Security will be a Priority

The problem with security in the metaverse is that today’s technology isn’t seamless enough to support the immersive nature of interconnected digital platforms. How can multifactor authentication (MFA) work effectively if we’re having to take our headsets off to gaze at our smartphones to wait for a pin code to be sent through each time we want to access our metaverse property? 

The metaverse will be a transaction-heavy space, and securing our personal data will be essential not only for our money but also our identities. In an avatar-based space, the safety of our identities online is critical, and cybersecurity firms must act to ensure that our online lives aren’t impacted by the theft of our data. 

With this in mind, it’s highly likely that the metaverse will be built on blockchain technology. These distributed digital ledgers are immutable, and require a consensus to be reached across decentralized nodes before new information can be stored. This means that blockchain can offer far greater resilience to cyber attacks than just about any centralized structure. 

However, this doesn’t mean that blockchain can’t currently offer protection from users forcibly handing over their personal data online. 

“I don’t know what muggings in the metaverse look like—but muggings will probably happen,” said Kevin Bocek, vice president of security strategy at Venafi. “We’re humans, and the threats that are likely to arise first are the ones that deal with us.”

Working to Prevent Security Risks in the Metaverse

Whilst it remains to be seen as to which cybersecurity firms will deliver the best and most powerful solutions for the metaverse, according to Microsoft co-founder, Bill Gates, these solutions could be required sooner rather than later. 

In a December blog post, Gates predicted that most virtual meetings will take place in the metaverse within the next two to three years

Although the technology that will power the metaverse is still in its fledgling stages, it’s likely that early versions of the metaverse will be built on a trust-based framework for sharing information - similarly to that of LinkedIn

By identifying friends, colleagues, clients, and entities that you trust, users will be able to share their information among a web of trusted individuals whilst assessing whether you can extend your trust based on other criteria like friends-of-friends, or suggested acquaintances. 

In the coming years, it may be necessary for companies to collaborate with one another in order to create a common standard that can help to establish security protocols effectively throughout the metaverse.

If Bill Gates’ assessment is correct, the foundation for the metaverse must be functional in a matter of months from the point of view of cybersecurity companies. This is likely to pave the way for more investors looking to leading firms within the industry as a strong bet for a price rally. 

As a global emphasis turns to distributed metaverse security, investors may find strong entry points for leading cybersecurity firms as protocols for this brave new world gets mapped out.