The slide this month by Oracle (ORCL) and Broadcom (AVGO) has reminded investors that artificial intelligence (AI) stocks don’t move up in a straight-line fashion. They may also want to consider that prior pullbacks by mega-cap AI equities have often proven to be buying opportunities.
For market participants that want to eschew market-timing and stock-picking, the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ) remain credible options, particularly after recent dips. Consider this: Broadcom, the ETFs’ fifth-largest holding, delivered stellar quarterly results. This included some compelling AI commentary.
It’s possible that AI concerns will wane. This means there is a buying opportunity – which can be met with QQQ and QQQM. Plus, the Invesco ETFs remain homes to some of the best names in the AI lot.
QQQ Still Alluring
There’s no denying that pullbacks by Broadcom and Oracle – tumbles that affected other AI equities – were alarming. Still, those slides don’t erase the AI case. You can find some of the best AI stocks in QQQ and QQQM. Nvidia (NVDA), the ETFs’ largest holding, is part of that conversation.
“Nvidia has a wide economic moat, thanks to its market leadership in graphics processing units, or GPUs, hardware, software, and networking tools needed to enable the exponentially growing market around artificial intelligence,” noted Morningstar’s Brian Colello. “In the long run, we expect tech titans to strive to find second-sources or in-house solutions to diversify away from Nvidia in AI, but these efforts will, at best, only chip away at Nvidia’s AI dominance.”
Microsoft (MSFT), the third-largest component in the Invesco ETFs, has recently pulled back. This could also present investors with a rare buying opportunity. The company’s Azure cloud computing sets the stage for dominance. Many view it as a strong long-term catalyst for shares of the QQQ/QQQM holding.
“Since existing customers remain in the same Microsoft environment, applications and data are easily moved from on-premises to the cloud. Microsoft can also leverage its massive installed base of all Microsoft solutions as a touch point for an Azure move,” said Morningstar’s Dan Romanoff. “Azure also is an excellent launching point for secular trends in AI, business intelligence and Internet of Things, as it continues to launch new services centered around these broad themes.”
Nvidia and Microsoft combine for nearly 17% of the QQQ/QQQM portfolios.
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