Investors that are well-acquainted with artificial intelligence (AI) know that some stocks, Nvidia (NVDA) chief among them, are more associated with the “AI stock” label than others.
So, it can be argued that separating the AI contenders from the pretenders is an exercise in stock-picking. That’s an activity some market participants don’t want to engage in. Specific to mega-cap growth and AI investing, the Invesco Top QQQ ETF (QBIG) can ease that burden. That ETF is home to eight stocks — the Magnificent Seven and Broadcom (AVGO), meaning its AI ties are viable.
That’s an obvious advantage offered by QBIG. However, upon closer examination, the actively managed ETF offers other perks. For instance, some of its holdings aren’t just levered to the AI trade today. Rather, they’ll be in that position for years to come. That could be an indication the fund is appropriate for long-term, growth-minded investors.
Why QBIG Matters to AI Investors
In a report out last Friday, Morningstar’s Susan Dziubinski highlighted the Magnificent Seven and the group’s impressive aggregate performance in recent years. She added that in terms of AI exposure, the seven stocks aren’t created equal.
“They’re all known for their innovation. They’re financially stable. And they have a global reach,” she notes. “As a result, the Magnificent Seven are considered to be good stocks to invest in if you’re looking for exposure to long-term growth trends, including artificial intelligence investing
Dziubinski points out that Morningstar analysts use a zero to four scoring system across various themes. That’s relevant to investors considering QBIG; one of the themes the research firm evaluates is AI and language learning models (LLMs).
The Morningstar scores on that front for the Magnificent Seven range from one to three. This indicates that investors need to be selective when it comes to accessing the AI theme. That trio is comprised of Nvidia, Microsoft (MSFT) and Google parent Alphabet (GOOGL).
Not surprisingly, stocks considered large-cap blend or growth far outweigh those considered value in the QBIG portfolio. However, it’s likely Alphabet is the value name in the fund even though it continues growing its top and bottom lines at rates commiserate with growth stocks.
“For those investors who want to buy one of the stocks in the Magnificent Seven today for AI investing exposure, Alphabet is the stock to buy,” added Dziubinski. “Not only does the company provide good exposure to the theme, but Alphabet’s stock is trading at 4-star levels, which means the stock looks undervalued according to Morningstar.”
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