This Hack Cost $18 Billion... And AI Will Make It Worse
On April 14, 2017, a disastrous leak changed cybersecurity forever...
The danger started when around 300 megabytes of stolen National Security Agency tools appeared on the open Internet.
One of those tools, a program called EternalBlue, enabled hackers to break into any Windows machine within a shared network.
It didn't take long for hackers to take advantage – and wreak havoc...
Within three months, they'd pulled off two of the worst cyberattacks of all time... totaling $18 billion in damages. Both attacks traveled across devices within theoretically secure networks.
Microsoft called the EternalBlue leak the digital equivalent of "the U.S. military having some of its Tomahawk missiles stolen."
And in the age of AI, attacks within a shared network are higher-risk than ever.
Let me explain...
Mr. Market Swiftly Reprices Cybersecurity
I've written a lot about how AI is reshaping the cybersecurity sector...
For one thing, deepfake tools are making social-engineering hacks easier than ever. For another, Anthropic's new Claude model, called Mythos, threatens to pave the way for industrial-scale AI-based attacks.
But shared-network hacking is still a major point of stress in the cybersecurity landscape.
That's because of the nature of shared-network traffic... and our yearslong reliance on the cloud.
What's known as "north-south traffic" moves data between a local network and the Internet (in other words, into and out of the cloud). And "east-west traffic" moves between devices on the same local network.
The difference matters because these different types of digital traffic face very different threats... And most of today's cybersecurity is built around one north-south interchange.
Network firewalls protect data from being hacked as it flows to and from the cloud. Take a look...
As you can see, firewalls exist to protect north-south traffic that's headed into or out of the cloud. But traffic within a local network doesn't even touch the firewall.
That's the weakness EternalBlue-based hacks were able to exploit... You see, these hacks spread viruses through east-west traffic. Traditional firewalls can't help. So a new generation of cybersecurity tools is rushing to fill the gap...
This problem won't be solved in a hurry, though. According to a 2025 study by security provider Akamai Technologies, only 35% of companies protect their east-west traffic.
However, looking at the diagram above, you might notice an even bigger issue...
Networked computers aren't the only thing south of the firewall – data centers are, too.
If you've been following the AI build-out, you'll see why this is a problem. Large-language-model ("LLM") chatbots do their work at the data-center layer.
Every time you ask an AI chatbot a question, it pings a data center. That inquiry bounces between dozens of graphics processing units ("GPUs") before an answer comes back.
All of that movement is east-west traffic.
The AI boom will put huge pressure on businesses to secure their local data. And that will mean a surge of cash for cybersecurity companies.
Cybersecurity stocks are already in a new uptrend. We can see it by looking at the First Trust Nasdaq Cybersecurity Fund (CIBR), a basket of cybersecurity companies. Take a look...
Today, CIBR is surging to all-time highs. That tells us the market is realizing how critical cybersecurity is in the AI age. So you might want to consider adding cybersecurity to your portfolio today.
Good investing,
Sean Michael Cummings
Further Reading
The cybersecurity sector fell in recent months on fears that AI would destroy the software industry. But history shows that decline was too much, too fast. And for one industry heavyweight, it might just have been the beginning of major gains.
"Mr. Market just sent the AI industry a message," Sean writes. The recent earnings season has made this clear... Investors are looking for one thing when it comes to companies' approach to AI. If you're holding on to the companies that get this wrong, the consequences could be expensive.
Market Notes
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Apple (AAPL)... Big Tech
F5 (FFIV)... cloud technology
CrowdStrike (CRWD)... cybersecurity
Palo Alto Networks (PANW)... cybersecurity
Fortinet (FTNT)... cybersecurity
Datadog (DDOG)... cybersecurity
Virtu Financial (VIRT)... financial services
Assurant (AIZ)... insurance
Ventas (VTR)... health care REIT
eBay (EBAY)... online marketplace
J.B. Hunt Transport Services (JBHT)... shipping
Philip Morris International (PM)... cigarettes and alternatives
Sunoco (SUN)... gasoline
Targa Resources (TRGP)... natural gas
Williams (WMB)... natural gas
NEW LOWS OF NOTE LAST WEEK
Equifax (EFX)... credit reports
Boston Scientific (BSX)... medical devices
General Mills (GIS)... packaged foods
Conagra Brands (CAG)... packaged foods
Chewy (CHWY)... pet products
Home Depot (HD)... home improvement
Builders FirstSource (BLDR)... homebuilder supplier
Ecolab (ECL)... sanitation technology