Large Government IT Players Poised to Get Significant Lifts From DC’s Embrace of Cybersecurity, AI

Major government IT contractors, such as Booz Allen Hamilton, CRA International,SAIC, and Palantir, should benefit meaningfully going forward from Washington’s continued emphasis on expanding its cybersecurity and AI capabilities. All four companies are involved in providing cybersecurity and AI solutions to the federal government.

What’s more, three of the four firms’ stocks have performed very well this year, while their valuations are still not extremely elevated. (When considering stocks’ valuations, it’s important to remember that the S&P 500 currently has an average P/E ratio of 27.87 times, while the Nasdaq’s equivalent ratio is 47.1 times). The fourth name,  Palantir, has rallied tremendously in 2024, but its valuation is extremely high at this point.

CISA Seeks Cybersecurity Enhancements

On the cybersecurity front, federal civilian agencies were asked to enhance and standardize their defense against possible cyber attacks. Specifically, a blueprint Issued by the CISA in July requested that the departments follow uniform guidelines related to asset management, vulnerability management, defensible architecture, cyber supply chain risk management, and incident detection and response. CISA is housed within the Department of Homeland security. .

One example of a section of the guidelines that is likely to benefit large federal IT contractors is CISA’s requirement that agencies “enable vulnerability prioritization and more timely mitigation of critical vulnerabilities.” By providing consulting services and installing IT security software,  large federal IT contractors can certainly help agencies accomplish the latter goals.

Washington Is Going All-In on AI

In terms of AI, the federal government has reported that it “is leveraging (the technology) to better serve the public across a wide array of use cases, including healthcare, transportation, the environment, and benefits delivery.” And Washington is also using the technology to advance national security, “model soil moisture,” and analyze “feedback” from veterans. , .

Among the other tasks for which the government is employing AI are searching for existing patents, analyzing weather threats, and “expedit(ing) determinations for disability benefits.”

Also noteworthy is that Washington’s spending  on the technology has increased by a great deal “in recent years,” while the number of AI-related contracts soared by a particularly large amount in the year that ended in March 2024. With the latter trend likely to continue as AI becomes more advanced, large federal IT contractors are well-positioned to get a major boost from the technology going forward.

*This article is intended to be informational only; it is not financial advice.