Ethical investing angle - cyber stocks vs AI stocks?

Sharing my take on something that's been bugging me: there isn't enough real information out there about ethical investing that actually gets good returns. Most of it is either "feel good and accept lower returns" or vague ESG box-ticking. So I'm putting my own thinking out in the open incase its helpful and to hear what this community makes of it. My angle: cyber stocks. I think cybersecurity is the most underrated sector for people who want growth and AI exposure but don't want to bankroll companies doing harm. It's defensive by nature - protecting hospitals, banks, and personal data, not building weapons or selling surveillance. Which is a very different thing from "defense stocks." The picks I've been looking at, and how they've done over the last 12 months: * Palo Alto +128%, Fortinet +121%, CrowdStrike +113% * If you'd rather not stock-pick, the diversified cyber ETFs did \~35–41% (WisdomTree, First Trust, Rize) For context: * Comared to Indexes: S&P 500 +21%, Nasdaq 100 +26% * Meanwhile two names ethical investors often screen out - Meta -22%, Palantir -5% Cyber seams to be a sector overlooked by a lot of values-aligned or impact investors. Keen to hear where people push back - Have you found other sectors that let you balance personal values & returns, or do you just accept a trade-off?

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u/interwebzdotnet 1 1 day ago

People act like buying a stock puts money directly into the operations of said business. It's a pretty naive take.
u/UnregisteredDomain 1 1 day ago

It doesn’t directly you are right. But to call other people naive, when you are just ignoring the fact that higher stock price = more money the executives of the company have access too, while pretending you aren’t actively helping the company….you are the cast iron pot calling the stainless steel kettle black.
u/anoooooooooooooooon OP 1 1 day ago

My take around "why ethical investing" is two fold: 1 - (the obvious) Not wanting to show market confidence/profit from companies doing bad things. 2 - (more relevant here) Companies doing 'bad' things might not be the best investment in the long run. e.g. Meta's liability on child safety is currently \~90% of its market cap and growing. Palantir's sock has taken significant dips after negative press & contract cancellations. The same is true for a number of the big AI companies - my view is there is a market correction coming and bad actors have exposed themselves to a lot of risk/liability meaning their underlying business model might not be so viable. I am newer to investing - so very open to challenge on this from folks who have been doing this for longer than I.
u/interwebzdotnet 1 1 day ago

Yeah, it's a noble effort,but wasted effort in my opinion. Honestly, I own a bunch of PLTR and so many of the people who think they are evil don't even understand the business model and what they do. The best summary of Palantir is that if you don't like a company being involved with their work,you shouldn't have liked that company (or government) before they had Palantir. They just take the data said company already has and they optimize operations and strategy around that. They arent some big data sucking/ capturing entity that comingle all the data in the world...that seems to be the common misconception. So just invest in companies that you truly understand the business model for.
u/anoooooooooooooooon OP 1 1 day ago

I'm not sure I totally align with that logic around Palantir. A Government holding your data for the initial purpose they collected it for vs putting that data into a 3rd party model for another purpose are quite different. And that's before we get into the risks around data and model sovereignty, or weather the data subjects have actually granted sufficient rights for their data to be used in this way (legal liability). The public backlash against them is leading to companies & governments seeking to cancel contracts, and I think the whistle blowing leaks at the moment suggest that there is cause for concern around data misuse which I think will exacerbate this. If we look at the move of European governments and regulators away from US tech dependency - Palantir is a part of that conversation. Dont get me wrong - over the last 3 years or so - returns wise, they have been a great investment. I think my point is more around that not being a trend that will continue in the same way.
u/interwebzdotnet 1 1 day ago

The government or the companies that collected your data are using it in their own silo. They are sharing it with a third party to further their own business or strategy,they arent magically mixing it with other entities. If the government has your data they just have it, whatever they do with it within their own ecosystem is their choice, there's no controversy there. Its not like the government is saying ohh,we have all this data,hey Palantir,go to your Walmart customer list and cross reference the tax returns against shoppers buying big ticket items at Walmart. They are saying hey, we're going to use this ICE data with the tax records to make some connections. While I don't approve of ICE at all, it's just the government using data they collected .. it's the collection methods and lack of accountability that I have major issues with.
u/Phuffu 1 1 day ago

I say “screw personal values I’m trying to make as much money as possible” These trades all happen on the secondary market, it’s not like you’re directly giving money to these companies, if that worries you. I don’t think voting on your 1000 shares will make a difference when there are tens of millions outstanding. If you own a Nasdaq fund then you def own some very sus companies. Finally, I think making investment decisions based on what has done well over the last year is a mistake. How will the stocks do in the next 12 months? I don’t care about the past. In fact, I get turned off when a stock has had a big run up. Just my two cents I’m sure others will disagree.
u/UnregisteredDomain 1 1 day ago

….the past is literally the only facts you can look at when you invest. The fact you take a look at your crystal ball to try to divine the future, means you are gambling not investing.
u/anoooooooooooooooon OP 1 1 day ago

My take around "why ethical investing" is two fold: 1 - (the obvious) Not wanting to show market confidence/profit from companies doing bad things. 2 - (more relevant here) Companies doing 'bad' things might not be the best investment in the long run. e.g. Meta's liability on child safety is currently \~90% of its market cap and growing. Palantir's sock has taken significant dips after negative press & contract cancellations. The same is true for a number of the big AI companies - my view is there is a market correction coming and bad actors have exposed themselves to a lot of risk/liability meaning their underlying business model might not be so viable. I am newer to investing - so very open to challenge on this from folks who have been doing this for longer than I. Note: I'll update my wording to make it clearer that im not talking about directly financing through investment.
u/chris2033 1 1 day ago

Screw ethics I’m trying to make money
u/SnS2500 1 1 day ago

Cybersecurity being important going forward is basically obvious to everyone, which is largely why the forward PE of PANW and CRWD (150ish) are absurdly high. Vital companies, but the "priced in" idea makes them a questionable risk/reward. \> not building weapons or selling surveillance Only if you don't define PLTR as cybersecurity.
u/anoooooooooooooooon OP 1 1 day ago

That's a good clarification on PLTR - I would definitely count them in defence/surveillance rather than Cybersecurity for my purposes here. PLTR I think is actually great use case for why "ethical" investing could be a better long term strategy. The negative attention they have been getting looks like it has been creating a persistent drag as well as some big single day drops for their stock. I think there is an argument to be made for better ethically aligned stocks being less volatile/more resilient in the long run - but that is just my two cents.
u/interwebzdotnet 1 1 day ago

Defense/government is 54% of their business, 46% is commercial,and it's growing fast. Commercial will probably be the majority of the business within another 3 quarters or so. The negative attention isn't the reason behind the stock price dip. It pulled back as the whole AI sector pulled back,and as per usual it was because people don't understand what they do. The companies that just build our AI at a loss,and the companies that were just throwing tokens($$$) at business problems are why there was a narrative that AI wasnt generating revenue, meanwhile thats all Palantir was doing ..generating revenue. They also strongly called out the fact that the LLMs and a lot of other AI companies require the surrender of data to the models,and loss of IP just to use AI, which is very true,just not for Palantir. They get lumped in with the cash burn of generic AI spend,but are a complete different animal,and people still don't understand that.
u/SnS2500 1 1 day ago

It pulled back because it hasn't made much money and had an even higher sky high forward PE than it does now (100+)... and its fortunes have recently moved the opposite of the AI sector. It is priced very similar to the other cybersecurity stocks. Good, vital niche, poor earnings for the marketcap.
u/interwebzdotnet 1 1 day ago

It is priced very similar to the other cybersecurity stocks.
So what part of Palantirs cyber security offerings are losing them money?
u/SnS2500 1 1 day ago

What are you talking about?
u/interwebzdotnet 1 1 day ago

You said they are in a good niche (cyber security) and said they don't make enough money doing it I want you to clarify some inputs into why you believe that.
u/SnS2500 1 1 day ago

You seem confuded about something. They are not losing money. Neither are PANW, CRWD and FTNT, the three largest cyber security companies. But given their high values and low profits they all have huge forward PEs, though FTNT isn't as bad as the other three.
u/interwebzdotnet 1 1 day ago

Thanks for finally proving my point. Point is that you are clueless. Palantir is not at all a cyber security business. Go read up on things before you make dumb comments.
u/SnS2500 1 1 day ago

What are you going on about? You seem very confused in asserting PLTR acted the opposite of what it did, but if you don't know what forward PE is, you should Google that.
u/interwebzdotnet 1 1 day ago

I know all about their PE ,and the rule if40 too. I'm not going to debate a company with you when you don't even know what business they are in.
u/SnS2500 1 1 day ago

I said to the OP: "Only if you don't define PLTR as cybersecurity." Take the time to read and you won't be so confused next time.
u/interwebzdotnet 1 1 day ago

Yet you keep implying and making comparisons to cyber security companies for no apparent reason at all.
u/anoooooooooooooooon OP 1 1 day ago

I replied along this thread to your other comment earlier in the thread. Commercial firms are (in my opinion) open to more risk than governments around the provision of data into 3rd party models - the lack of sufficient consent being granted by the data subject or licensor for their data to be used in this way is a starting to hit the courts now and I think the financial exposure hasn't been priced in to current shareprices.
u/interwebzdotnet 1 1 day ago

I'm not sure what you are getting at. Data policies belong to Palantirs customer, not to Palantir.
u/mainevent1155 1 1 day ago

If you aren't trying to maximize your risk-adjusted returns when investing, you're doing it wrong.