It’s often said that artificial intelligence (AI) is in its infancy of growth, and that’s true. For those who need more convincing, there are plenty of compelling data points.
In what could bode well for the long-term outlooks for ETFs such as the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ), it’s believe AI-related revenue could swell to $420 billion in 2027 from $28 billion in 2022. That’s the take from UBS, which recently dubbed AI the “tech theme of the decade.”
Among ETFs that are not dedicated AI plays but offer up related exposure, QQQ and QQQM are among the most attractive options. That is because of their mega-cap growth-heavy rosters. Those rosters include notable allocations to AI equity plays, including Alphabet (GOOG), Nvidia (NVDA), and Microsoft (MSFT), among others.
Bright Artificial Intelligence Outlook for QQQ, QQQM
For investors willing to take the long-term view of AI, which could be advisable as an avenue for smoothing out bumps along the way, the ETF wrapper is conducive to that strategy. QQQM makes sense as a buy-and-hold AI play. It has a low annual fee of just 0.15%, or $15 on a $10,000 stake. Plus, there’s a strong fundamental case for taking the long view of AI.
“[We] believe AI will remain the key theme driving global tech stocks again in 2024 and the rest of the decade,” wrote UBS analyst Sundeep Gantori.
The analyst added that as AI advances, more companies could be compelled to consider mergers and acquisitions to expand AI footprints. That scenario would favor large, financially sturdy firms with competitive advantages. And those traits are applicable to a bevy of QQQ and QQQM holdings.
Another point favoring these two ETFs as AI plays are their depth across multiple AI-related tech industries. These industries include semiconductors and software. Both of those are expected to derive significant benefits from AI advancements.
“Semiconductors, while cyclical, are well positioned to benefit from solid near-term demand for AI infrastructure,” added UBS. “Meanwhile, software, with broadening AI demand trends from applications and models, is a defensive play, thanks to its strong recurring revenue base.”
Nvidia, the largest semiconductor holding in QQQ and QQQM, more than tripled last year. But analysts believe other chip names will benefit from AI long-term, too. Those include QQQ and QQQM member firms such as Broadcom (AVGO) and Advanced Micro Devices (AMD).
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