The S&P 500 notched a first-quarter gain of 6.77%. Impressive to be sure, but that trails, by a wide margin, the more than 20% returned in the first three months of 2023 by the Nasdaq-100 Index (NDX). That means exchange traded funds such as the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ) delivered for investors in the first quarter.
Both ETFs follow the Nasdaq-100, and it was some of those funds’ marquee holdings that drove broader market gains in the January through March period. Some of those stocks are redemption stories, meaning they were among the culprits behind the 2022 struggles of QQQ and QQQM.
Take the case of Nvidia (NVDA). The semiconductor giant is the third-largest technology component in the two Invesco ETFs at a weight of 5.23%. A 2022 laggard, Nvidia is roaring back this year thanks to its exposure to artificial intelligence (AI).
“A key driver for NVDA is that the company already has a vast install base in which they can tap into to expand adoption of their AI solutions,” wrote Piper Sandler analyst Harsh Kumar in a recent report. “By starting with the current install base, this creates a customer feedback loop that should accelerate AI adoption.”
In what could signal a sympathy trade, Nvidia rival Advanced Micro Devices (AMD) posted a first-quarter gain of about 51%, benefiting QQQ and QQQM because the ETFs feature a 1.20% weight to that chip stock.
While CEO Mark Zuckerberg recently deemed 2023 to be “a year of efficiency” for Facebook parent Meta Platforms (META), the shares surged 76.1% in the first quarter, providing a lift to the S&P 500 as well as QQQ and QQQM. The Invesco ETFs allocate 3.60% of their weight to shares of Meta.
Tesla (TSLA), which is the second-largest consumer discretionary holding in QQQ and QQQM, was another major contributor to the S&P 500’s first-quarter run, despite facing intensifying competition.
In a note out last week, Piper Sandler said it’s confident Elon Musk’s company can deliver 1.8 million electric vehicles this year. Baird is another research firm bullish on the stock.
“Reiterate Outperform rating ahead of deliveries. Although sentiment (and share price) have improved from Q4, we still like the setup into deliveries and the remainder of the year,” according to a recent note from the brokerage house.
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