Host: I want to turn now to Christian Magoon, CEO of Amplify ETFs, to talk a little bit about thematics and dive more deeply into the world of cybersecurity investment. Christian, thank you so much for joining us today. I want to start with HACK, one of your ETFs.
Christian Magoon: No, great to see you as well.
Host: So HACK right now up about 48%. Now that's compared to about 17% in the Nasdaq. So I'm curious to know, I have to ask, with such a divergence in cybersecurity compared to the rest of the tech sector, what has changed so dramatically for those cyber stocks this year?
Christian Magoon: It's a great question because it really has seen some outperformance here in 2026 and, you know, our cybersecurity ETF HACK has now had a 33% average annual return over the last three years. So it's really been on a roll this year. It's broken out even further. I think the change has been that initially AI was looking to be kind of a cannibalization trade versus software as well as cybersecurity stocks. However, the market has kind of started to realize that actually AI is an accelerator to cybersecurity stocks as cybersecurity stocks have reported increased earnings, increased outlook due to the more threats that are coming from AI attacks, the use of AI agents, robotics. So there's simply just more business demand because of AI in the cybersecurity area. So that's been very good for cybersecurity stocks, as you said, you know, nearly tripling the Nasdaq 100 this year in terms of performance.
Host: What do you think really caused that narrative shift, you know, between that AI is disruptive and it's going to cannibalize cybersecurity to now that AI is actually going to be a tailwind for that sector?
Christian Magoon: I think initially, uh, the thought was that you could just use a general AI application to, uh, secure your networks, secure your data, and, you know, I think once people thought through it, they really realized that you need a specialized, uh, group of software or companies, uh, backing you up. That you doing it on your own with cloud or ChatGPT probably isn't gonna suffice from a corporate governance standpoint, from a governmental standpoint, maybe even from an individual standpoint, and the value and expertise of these underlying cybersecurity stocks really started to shine through. Remember, it's not just software when we're talking about cybersecurity, it's also services. So, some of the cybersecurity efforts are actually people-powered, where they're going in and doing investigations to where these threats came, looking at the vulnerabilities, repairing vulnerabilities, assessing what data perhaps was taken, uh, and how to best secure some of these unique data pathways. So there really does need to be a human element there and cybersecurity stocks really kind of marry the software with the human element to kind of deliver the best-in-class cybersecurity solutions that AI just isn't there yet for. So I think that's really what changed.
Host: So I want to talk about something that I thought was super interesting because you actually described cybersecurity as having more defensive characteristics, which totally made me do a double take. I was super surprised because when I think of defense, I don't ever think about cybersecurity. And so you're saying that compared to the broader AI trade, because security spending isn't really optional, say more about that and the resilience that that spending has if the economy slows down or some of those tech budgets really start getting slashed.
Christian Magoon: Yes, cybersecurity stocks are really in the sweet spot when it comes to technology investing because they do have a variety of growth catalysts behind them. However, there's an underlying defensiveness that is unusual for a technology vertical in the case of cybersecurity stocks because you can't stop spending on cybersecurity. If GDP slows down, if earnings slow down, this is an essential spend for businesses, for governments, for individuals because of the risk involved with the data that's being secured by cybersecurity. So unlike many of the cyclical types of businesses in technology, semiconductors would be a great example that can see spending go up or down or even have commoditization happen where there's a lot of supply or there's not much supply and that affects prices. Cybersecurity has this underlying defensiveness when it comes to spending from multiple areas, not just corporations, governments, as well as individuals. So it has a little bit of a floor or consistency that you don't see in many of these growth verticals. I think that's what sets cybersecurity stocks in our HACK ETF apart from many of the other kind of verticals in technology that can see some big highs and some big lows due to other types of factors that are more sensitive to the economic cycle.
Host: So where do you think some of the next big wave of spending in cybersecurity is going to come from, and how much of the growth in that cybersecurity story has already actually been priced into some of these stocks?
Christian Magoon: Well, I think, you know, probably three areas that are interesting. One, agentic AI, so AI going out and, you know, being your agent and transacting for you on the web, potentially taking some of your data and transacting with your data. The increased use of those agents is going to mean new and unique cybersecurity solutions to put guardrails around there. Secondly, the rise of physical AI as we see more robots or industrial-use robotics, there's going to be unique cybersecurity tools that are going to have to be employed to make sure that does not go rogue. And then third, as we see a lot more interest in AI in general, I think we're going to see some mergers and acquisitions, potentially some of these AI platforms start to acquire some of these AI cybersecurity companies and integrate them or partner with them to have best-in-class AI coupled with cybersecurity solutions, which again is not only software but also people and services. So I think that's kind of what propels it into the next leg. We've seen some very positive outlooks in earnings numbers, but I don't think this growth is fully priced in. Uh, if you believe in AI and kind of how it could revolutionize how we're doing business as a society, how much data, uh, is now going to different pathways and how many agents or, uh, different applications we're gonna use that are gonna be automated, um, I think that's not fully priced in the cybersecurity trade as of right now, uh, even with the recent run it's had. So, I think cybersecurity again presents a very compelling value opportunity and rides alongside the AI trade, but with some more defensive characteristics, which I think would be welcome for many types of investors who run pretty nicely with the AI trade but maybe want to kind of invest in the next wave in some of the ancillary areas of the market that will stand to benefit as this really continues to grow.
Host: All right, we'll have to leave that there. Christian Magoon, CEO of Amplify ETFs, thank you so much for joining us. Always a pleasure chatting with you.
