AI and cybersecurity are tipped for big things in 2021; here are the ASX stocks to watch

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Two industries that endured a positive 2020 and could be set for a lucrative 2021 are AI (artificial intelligence) and cybersecurity.

Cybersecurity outlook in 2021

Easily the biggest reason for the sector’s growth this year is companies being forced to operate remotely (and still facing cyber threats) have rushed to various cybersecurity providers, both listed and private.

But isn’t the shift over? Emma Pudney, Asia-Pacific chief technology officer at Rackspace Technology, thinks there’s still more to play out here.

“The year that has been saw many organisations shift gears to meet immediate demands of remote working,” she told Stockhead.

“However, because of the urgency, strategies that were implemented were not considered for the long term, creating the need to now go back and create future-proof plans.”

Pieter Danhieux, the co-founder and CEO of Secure Code Warrior agrees.

“With company reputations and lofty penalties at stake, business leaders will continue to invest in an array of cybersecurity technologies to safeguard their data in 2021 — no one wants to be the next high-profile breach,” he said.

Danhieux briefly touched on another reason for adoption of cybersecurity solutions in the potential for data breaches. This was a pre-COVID trend but is set to escalate next year with the continued tightening of privacy laws.

Raymond Maisano, Cloudflare’s Australia and New Zealand head, is anticipating a review of Australia’s Privacy Act which might lead to further tightening of existing regulation.

“They [nations] all set different rules and levels of protection for citizens’ personal data, and it can quickly become challenging for multinational companies to navigate data compliance across borders,” he said.

“I believe technologies that help simplify and automate that process for organisations will keep on growing in popularity as the world of business increasingly shifts online.”

Cybersecurity ASX stocks

ASX cybersecurity stocks have gained an average of 90 per cent in 2020.

Here’s a list of all ASX cybersecurity stocks and their performance in 2020

Diversified cybersecurity company Tesserent (ASX:TNT) is on top having gained 628 per cent in 12 months. The company grew through several acquisitions and reached its $100 million annualised gross revenue target four months earlier than planned.

Taking silver and bronze are WhiteHawk (ASX:WHK) and Family Zone Cyber Safety (ASX:FZO).

WhiteHawk has also had a successful year on several fronts winning multiple US government contracts, and in Australia, advanced its industry-leading Cyber Risk Program.

The latter move has been in response to recent demands from Australia’s Council of Financial Regulators (CFR) that banks and financial institutions improve fortification of computer systems.

Family Zone Cyber Safety focused on measures aimed to restrict cyber bullying.

This company has also grown in 2020, reaching 1.5 million contracted student licences towards the end of last year. Some $4 million in contracts were sold in America alone – representing year on year growth of 120 per cent.

AI outlook in 2021

AI, or machine learning, is also expected to continue growing in 2021 and beyond.

Fintan Lalor, Asia-Pacific general manager at Wrike, told Stockhead that the global AI market is growing 42.2 per cent every year.

“I’m expecting intelligent technologies that leverage AI to help organisations be more structured and organised to keep booming in 2021, especially as remote working seems to be here to stay beyond the pandemic,” he said.

One example he named of where businesses could adopt AI is predicting project risks.

“AI can identify projects that are at risk of delays, and provide recommendations for prioritising tasks, so users can focus on work that is most impactful to the project’s success,” Lalor said.

Manish Bahl, an assistant vice president at Cognizant, said banks would be one of the biggest adopters of AI. An example he named was voice technology, which he believed would shift from ‘nice to have’ to ‘must have’.

“The change in customers’ habits (from touch to touchless) triggered by the pandemic has become a permanent fixture for many,” he said.

“Progressive banks are already moving ahead by empowering customers to check their account balance, set payment reminders, and conduct financial transactions through third-party voice assistants (Alexa Skill or Google Action).

“While building a voice functionality for smart speakers is a good starting point, banks must also add a voice capability to their mobile apps, websites and other digital touchpoints with customers.”

AI stocks

While there is a substantial gap between the best and the worst, AI stocks are up 86 per cent in 2020 similar to cybersecurity stocks.

Here’s a list of ASX AI stocks and their performance in 2020

Most stocks have AI solutions which are integrated into a flagship product. BrainChip (ASX:BRN), however, has AI technology as its flagship product.

Its technology ‘BrainChip Studio’ has the ability to process millions of images in seconds for facial and object recognition – all without a central hub and even with low quality footage.

It is currently working on developing its AkidaTM neuromorphic-system-on-a-chip (NSoC) that will see its unique machine learning technology deployed on something as small as a chip.

Shares went on a famous run earlier this year when it announced a tie up with VORAGO, a US tech business, to develop products suitable for space exploration.

The other multi-bagger in 2020 is semiconductor stock Weebit Nano (ASX:WBT) which is making chips strong enough to meet demanding AI applications.

While it is not yet at production it has made significant strides towards this in 2020 – exciting its investors.

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