It’s safe to say 2024 will go down as another good year for technology stocks. With a short amount of time left in the year, the tech-heavy Nasdaq-100 Index (NDX) is higher by 27.7% on a year-to-date basis.
That means NDX will close higher for the fifth time in the past seven years while posting its fifth double-digit increase over that span and to be fair, one of those annual losses occurred in 2018 when it lost just 0.1%. All of that has amounted to good news for NDX-tracking exchange traded funds such as the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ).
NDX has recently notched a series of all-time highs and there’s been ample chatter over the course of this year recording some of the benchmark’s marquee holdings being richly valued. However, QQQ and QQQM have ascended in undaunted fashion. It remains to be seen if the good times will continue in 2025, but in what could be good news for the Invesco ETFs, some market observers are constructive on the tech sector heading into next year.
Heading Into 2025, Good Vibes for Tech
Companies including Alphabet (GOOG), Apple (AAPL) and Nvidia (NVDA), all of which are QQQ/QQQM holdings, have delivered the goods this year and have done so with varying catalysts.
“The outlook for these companies, and for the technology sector in general, remains generally positive. The largest companies are not homogenous but do share one common denominator. They tend to have specific characteristics that allow them to dominate their respective industries and generate exceptional growth, margins and returns,” according to Schroders.
Take the case of Google parent Alphabet, which has rallied in recent days after unveiling a significant quantum computing breakthrough – one that previously went unsolved for decades. That’s one sign that QQQ/QQQM holdings could rally anew in 2025 without having to depend solely on artificial intelligence (AI) as a catalyst.
That doesn’t imply AI is waning. It will continue looming large for tech investors next year and it’s an issue market participants, particularly those engaged with ETFs like QQQ and QQQM, need to be aware. The good news is that many of the ETFs’ top holdings have the resources to make AI strides.
“In part, this is because they can afford to invest huge sums, given rock solid balance sheets and strong cashflows. But the right-hand chart below shows that the forecast incremental sales from these investments – over the next two years at least – are actually quite modest. The market is just not sure that the monetisation of these investments will be positive for shareholders,” concludes Schroders.
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