Key Points
As interest rates and Treasury yields rise, more investors will likely sell their stocks to buy CDs, T-bills, and other low-risk fixed-income investments. That shift could cause many tech stocks, which were lifted higher by AI tailwinds over the past few years, to pull back sharply.
If that tech sell-off happens, investors should consider buying an exchange-traded fund (ETF) that tracks all of the top tech stocks rather than betting on a single stock’s recovery. One of those top ETFs is the Invesco QQQ Trust (NASDAQ: QQQ), which passively tracks the Nasdaq-100. Let’s see why it’s still a compelling ETF to buy if the market pulls back this year.
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What does QQQ track?
The Nasdaq-100 comprises the 100 largest non-financial stocks in the Nasdaq Composite Index (NASDAQINDEX: ^IXIC). It intentionally excludes financial stocks, which account for roughly 3% of the index, because they’re more dependent on interest rate cycles than on innovative new products or organic growth. The index is rebalanced quarterly and reconstituted annually, so it constantly prunes the weaker companies while adding higher-growth ones.
QQQ’s top holdings currently include Nvidia (8.1% of its portfolio), Apple (7.7%), Microsoft (6.2%), Micron (4.5%), and AMD (4.2%). Those are also the S&P 500‘s (SNPINDEX: ^GSPC) biggest non-financial stocks, but QQQ allocates larger slices of its portfolio to each high-growth stock. The QQQ also doesn’t include most of the S&P 500’s slower-growth blue chip stocks.
Since QQQ is passively managed, it charges only a 0.18% expense ratio. That’s much lower than the average expense ratio of 0.44% for actively managed ETFs.
Why will QQQ keep growing?
QQQ’s top holdings are all exposed to the secular expansion of the cloud and AI markets. Those tailwinds won’t dissipate anytime soon.
According to Grand View Research, the cloud computing and AI markets could grow at CAGRs of 16% and 30.6%, respectively, from 2026 to 2033. If you want to capitalize on those trends but don’t have the time to research individual AI chipmakers, cloud infrastructure providers, and AI software makers, it’s a good idea to simply buy a basket of the top 100 companies.
Past performance never guarantees future gains, but QQQ has delivered an impressive total return of 549% over the past ten years, beating the S&P 500’s total return of 324%. So if you can withstand some near-term volatility and don’t plan to withdraw your money from the market for at least a few more years, it’s a great idea to accumulate QQQ if the market crashes.
Should you buy stock in Invesco QQQ Trust right now?
Before you buy stock in Invesco QQQ Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
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Leo Sun has positions in Apple. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
