Scams are growing more sophisticated… the related “inevitable” investment opportunity… big dollars flowing from the corporate world… how to invest
Granddaddy, please help me!
The small voice on the other end of the line sounded panicked.
As my elderly father tells the story, the call came from his “grandson” who was in trouble.
Without getting into details, the request was what you’d expect…
Money.
My father recognized the scam immediately. However, now in his mid-80s and long retired, he’s also bored. So, he was thrilled to have this unexpected activity.
For almost 45 minutes, my father had a fabulous time walking up to the edge of disclosing sensitive financial information before pulling back, feigning confusion, and frustrating the scammer to no end.
Eventually, when he’d had enough, my father casually asked, “By the way, just remind me – which grandson is this?”
The call ended shortly thereafter.
While this story had a happy ending, we’re entering an age in which many very intelligent people will be scammed
My father reported that his “grandson,” sounded nothing like his actual grandson. But what if that had been the case thanks to an AI-generated vocal clone?
According to Security.org’s 2024’s “Deepfakes Guide and Statistics,” just three seconds of audio is sometimes enough to produce an 85% voice match using AI.
Consider how easy it is to get an audio file from someone off social media these days.
And be careful about thinking you’d be able to spot a scam easily…
In April, Spanish authorities dismantled a crypto investment scam that used AI-generated deepfake ads featuring public figures.
Over 200 victims worldwide were defrauded to the tune of about $20.9 million. Six individuals were arrested in Spain’s “COINBLACK – WENDMINE” operation.
Here’s Bleeping Computer:
The scam had multiple phases, starting with typical “romance baiting” or the threat actors posing as “financial advisors” and ending with a twist of fake money recovery claims.
Victims were chosen via algorithms that selected persons whose profiles matched the cybercriminal’s targeting requirements and subsequently targeted by AI-generated deepfake ads.
“With the help of Artificial Intelligence, the scammers created fake ads featuring well-known national figures apparently recommending investing in these products,” explains the Policia National announcement.
While these scams are terrible, they also provide a no-brainer investment opportunity
When it comes to building wealth in stocks, few concepts will help you more than something we at InvestorPlace call “Inevitables.”
“Inevitables” is a concept popularized by Warren Buffett. It’s his term for businesses with huge competitive advantages that dominate their industries.
From Buffett’s 1996 Berkshire Hathaway investor letter:
Companies such as Coca-Cola and Gillette might well be labeled “The Inevitables.” Forecasters may differ a bit in their predictions of exactly how much soft drink or shaving-equipment business these companies will be doing in ten or twenty years…
In the end, however, no sensible observer – not even these companies’ most vigorous competitors, assuming they are assessing the matter honestly – questions that Coke and Gillette will dominate their fields worldwide for an investment lifetime.
In simple terms, “the Inevitables” are the market leaders of specific sectors that will be in demand for decades to come.
But there’s a twist…
Inevitables don’t have to be specific stocks.
The concept is applicable to certain technologies, trends, or cultural shifts that are so impactful, that massive growth is “inevitable” … virtually guaranteed.
Today, AI cybersecurity is such an inevitable trend – and will provide a huge payoff for investors
AI is transforming everything – reshaping industries from finance to healthcare to logistics.
But the same algorithms that help Amazon recommend your next purchase or let ChatGPT write an email can now be used to power phishing scams, identity theft, financial fraud, deepfake extortion, data breaches, and election interference – at scale.
This is not hypothetical. It’s happening now.
A few statistics:
- Arkose Labs notes that 73% of internet traffic today is bots, many powered by AI, and often involved in credential stuffing (a type of cyberattack in which the attacker collects stolen account credentials, typically consisting of lists of usernames or email addresses and the corresponding passwords) or fraud attempts.
- According to the consulting group McKinsey, cyberattacks will cost the global economy over $10.5 trillion annually by the end of the year – up from $3 trillion in 2015. A key accelerant? The rise of AI-powered threat actors.
- A Security.org survey found that 1 in 4 Americans have now been targeted by AI-generated scams – voice cloning like my father experienced, deepfake videos, and/or highly personalized phishing emails.
Businesses are spending big dollars to protect against growing cyberthreats
In February 2024, a finance employee at the Hong Kong branch of a multinational firm received an email urging a “secret transaction” from the CFO.
Doubtful at first, the employee ultimately joined a video conference where AI-generated deepfakes of the CFO and colleagues appeared fully authentic.
Convinced, the employee authorized 15 transfers totaling approximately $25.6 million to the scammers’ accounts before realizing the fraud a week later.
This is a wake-up call for businesses and governments alike.
Every major enterprise – from banks to retailers to logistics companies – will be forced to invest in next-gen cybersecurity that uses machine learning, neural networks, anomaly detection, behavioral modeling, and generative AI to defend their systems.
Here’s Shailendra Upadhyay, Senior Research Principal at Gartner:
The continued heightened threat environment, cloud movement and talent crunch are pushing security to the top of the priorities list and pressing chief information security officers (CISOs) to increase their organization’s security spend.
This is no longer optional. It’s the cost of doing business in the digital age.
It’s…inevitable.
But from an investment perspective, it makes our job easy…
We position our investment dollars in front of this flood of “security spend.”
So, how do we invest?
The simplest one-click solution is a broad ETF such as “HACK.” It holds many of the top names in cybersecurity – Broadcom, Cisco, Cloudflare, Fortinet, and Zscaler, to name a few.
(Disclaimer: I own HACK.)
It’s up 36% over the last 12 months, tripling the S&P’s return.
However, because HACK is an ETF, you’re inadvertently investing in some underperformers along with the winners. This weighs on your returns.
For example, take Cisco (CSCO) and SentinelOne (S), both of which are holdings in HACK.
As you can see below, over the past year, while Cisco has popped 51%, SentinelOne has fallen 7%.
If this makes you think twice about a buy-and-hold approach to HACK, a second option is to focus on specific cybersecurity leaders like Cisco.
You could hold them for the long-haul (through inevitable volatility), or you can trade their volatility for shorter-term gains.
If trading is more your speed, I’ll quickly point you to TradeSmithGPT, which our corporate partner, TradeSmith, just unveiled yesterday.
This is an AI-based trading tool engineered to pinpoint specific windows when the odds of a significant (and tradeable) stock move increase. The tool also can suggest which way a stock is likely to move, then offer suggestions for how to play it in a way that amplifies your returns.
Yesterday, TradeSmith CEO Keith Kaplan provided an impressive live demonstration; but it’s more important that you come to your own conclusion. To see the free demo, here’s your link to Keith taking it for a spin.
Circling back to playing HACK, you could also take a half-and-half approach.
In other words, allocate some of your capital to HACK as a buy-and-hold investment while a different “trading allocation” goes into TradeSmithGPT-sourced ideas for quicker trading gains.
Whichever approach you prefer, don’t miss this opportunity
Every few years, a shift happens that permanently alters the investing landscape. AI itself is one of those shifts.
But beneath the surface of this mega-trend is a companion megatrend that’s just as urgent, unavoidable, and potentially lucrative…
As long as we have bad actors, we’ll have a need for protection from bad actors.
And that makes top-tier AI plays one of the most obvious, no-brainer, long-term “inevitable” investments in the market today.
Invest accordingly.
Have a good evening,
Jeff Remsburg
