Battered and bruised through Q1, the Magnificent Seven and other large- and mega-cap growth stocks have facilitated the broader market’s recent bullishness. That’s benefited ETFs such as the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ), which are heavily allocated to the Magnificent Seven, as well as other growth names with clear AI ties.
There has been much talk about tariffs and other macroeconomic challenges. But companies with AI exposure are expected to spend hundreds of billions of dollars this year on AI-related expenditures. That’s according to Wedbush analyst Dan Ives. Much of that spending will be driven by and flow to QQQ/QQQM holdings.
Ives recently published a list of 30 top artificial intelligence equity ideas. That’s a group that features a slew of QQQ/QQQM components. The analyst highlighted several semiconductor stocks as long-term beneficiaries of the artificial intelligence trade. Those include Broadcom (AVGO), Advanced Micro Devices AMD and Micron (MU). That trio combines for 6% of the QQQ/QQQM portfolios.
Usual QQQ Suspects Could Benefit from AI Rebound
As Ives notes, cloud computing will likely be a hotbed of AI spending this year. It could potentially reach $325 billion or more. He said Microsoft (MSFT) is the leader at the AI/cloud intersection while Alphabet (GOOG) and Amazon (AMZN) are making strides as well. Those three stocks combine for more than 21% of the QQQ/QQQM rosters.
On the consumer-facing side of AI, Apple (AAPL) and Meta Platforms (META), both of which are QQQ/QQQM member firms, loom large.
“With both people and businesses ramping up their use of AI, consumer internet companies stand to benefit, too, Ives says. Positives could include AI customer service, to improved search, personalization of ads, and dynamic pricing,” reported Teresa Rivas for Barron’s.
Ives is also bullish on cybersecurity and software stocks as AI plays. That’s good news for QQQ and QQQM. And that’s because the Invesco ETFs are homes to a slew of names from those industries.
Another benefit of QQQ and QQQM regarding the AI trade is investors can benefit from embracing wide-moat firms with strong balance sheets. Those boxes are checked by multiple stocks residing in the Invesco ETFs.
“High-quality, monopolistic companies with strong earnings momentum are favorable in our base case of an economic muddle [through. That’s especially so] after large price drawdowns,” noted 22V Research’s Dennis DeBusschere, by way of Barron’s.
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