The Nasdaq-100 Index (NDX) capped off another solid five-day run last week, adding 1.84% to extend its year-to-date gain to nearly 15%. Indeed, some of that bullishness is attributable to market participants pricing in an interest rate cut by the Federal Reserve last week. However, AI remains a powerful factor.
Investors may consider the NDX-tracking Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ). Yes, rate cuts should be impactful for tech-heavy ETFs like QQQ and QQQM. The tech sector is a longer duration group, meaning its cash flows are longer-dated than other sectors.
What’s not longer-dated is the progress being made on the artificial intelligence front. This is material to QQQ/QQQM investors because those ETFs are littered with artificial intelligence leaders. While consensus holds that artificial intelligence is still young – it is – significant progress has been made in just a year.
AI Growth Important Catalyst for QQQ
For now, artificial intelligence isn’t a perfect technology. However, progress persists. Even if it’s incremental, it’s still proving to be enough to power gains for funds such as QQQ and QQQM.
“When it comes to AI, one year can amount to decades of progress. While the first nine years of the tech tour had few whispers of AI, the past three have featured an increasingly loud AI takeover,” observed BlackRock.
BlackRock’s Tony Kim actually deemed the rate of change in artificial intelligence “unprecedented.” Though specific stocks or ETFs weren’t mentioned in relation to that comment, it can be inferred that that some artificial intelligence leaders, many of which are QQQ/QQQM holdings, are making massive strides. That could be a sign that yesterday’s criticisms are tomorrow’s kudos.
“As humans, he says, we’re accustomed to linear forms of change in increments of 5%-10%. In AI, he sees change at the chip level coming in at 2x a year, and at 10x a year at the model intelligence layer,” added the asset manager.
QQQ/QQQM investors will find talk of artificial intelligence semiconductors relevant. The ETFs are home to an array of AI-tethered chip names. In terms of newer frontiers, the Invesco ETFs also have exposure; consider the union of artificial intelligence and cybersecurity.
“For all its potential, AI does come with questions. One big one centers on issues of privacy and safety,” concluded BlackRock. “AI could equally be used to defend against AI-based attackers. It’s a problem that is here to stay in a “cat and mouse battle” of using AI to attack and using AI to defend. This can mean opportunity for cyber security companies.”
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