ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Nasdaq Portfolio Solutions Channel
  2. Some Big Tech Stocks Could Benefit From Rising Rates
Nasdaq Portfolio Solutions Channel
Share

Some Big Tech Stocks Could Benefit From Rising Rates

Tom LydonMar 21, 2022
2022-03-21

Owing to the long-term cash flows of technology companies, it’s conventional wisdom that stocks from this sector are vulnerable to rising interest rates.

Obviously, that’s a point to ponder because the Federal Reserve boosted borrowing costs by 25 basis points last week, and some experts say that another six or seven rates could be delivered this year. It’s also believed that the Fed’s newest tightening cycle could extend well into next year or even into 2024.

In theory, that sounds like bad news for exchange traded funds such as the Invesco QQQ Trust (QQQ B+) and the Invesco NASDAQ 100 ETF (QQQM B), both of which track the Nasdaq-100 Index (NDX). The reason that QQQ and QQQM could potentially prove more durable than expected as rates rise is simple: Some of the funds’ marquee holdings are among the most cash-rich companies in corporate America, and as rates rise, so does interest on cash instruments.

While absolute interest rates will remain low, even modest rate hikes by the Fed could mean billions more in interest earned by companies holding hundreds of billions in cash.

“Big companies that should gain are cash-rich Apple (AAPL) and Alphabet (GOOGL). Apple had $203 billion of cash and equivalents at year-end 2021, and Alphabet was sitting on $139 billion reports Andrew Bary for Barron’s.

To be clear, Google parent Alphabet is classified as a communication services stock. Technology stocks account for 50.29% of QQQ and QQQM, while the communication services sector represents 17.51% of the ETFs’ rosters. The impact that higher interest rates can have on the cash hoards of Apple and Alphabet is staggering and good news for investors.

“Apple could be earning $4 billion more on its cash by 2023 and Alphabet nearly $3 billion. Higher interest income could boost Apple’s net income by about 3% next year, and Alphabet’s earnings may get a 4% lift,” according to Barron’s.

Of course, that’s relevant to investors mulling either QQQ or QQQM because the Invesco ETFs allocated 12.12% to Apple, making the iPhone maker the largest holding in both funds. The pair of funds also allocated 7.63% combined to the two Alphabet share classes.

QQQM charges 0.15% per year, or $15 on a $10,000 investment, making it five basis points cheaper than its stablemate QQQ.

For more news, information, and strategy, visit the Nasdaq Investment Intelligence Channel.

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X