With the artificial intelligence (AI) stock rally broadening to include names beyond the magnificent seven, the Nasdaq-100 Index (NDX), as of May 12, sported a year-to-date gain of more than 16%. That’s more than enough to appease many investors, perhaps prompting them to ignore the index’s scant dividend yield of 0.40%.
Still, some investors want to have their income cake while eating it too. In other words, they want steady income while participating in some of the Nasdaq-100’s upside. The NEOS Nasdaq 100 High Income ETF (QQQI) is the ETF that accomplishes that objective.
The $11.63 billion QQQI, an options income spin on the Nasdaq-100, is higher on a year-to-date basis, confirming it participates in some, emphasis on “some”, of NDX’s upside. That proposition is enhanced by the fact that the actively managed QQQI carries a distribution rate of 14.11%.
Case for QQQI is Solid
No stock moves up in a straight line forever and QQQI offers a reliable income stream to cushion the periods of tech volatility. For investors considering the NEOS ETF while pondering the outlook for already hot NDX components, it’s worth noting that some experts believe the path of least resistance is to the upside.
“The long-term case for investing in technology starts with business demand,” noted US Bank. “Companies continue to invest in tools that can improve productivity, expand margins, and support earnings growth over time. That spending reaches across hardware, software, infrastructure, communications platforms, and the systems that power artificial intelligence.”
QQQI’s Nasdaq-100 DNA is important because it positions the ETF as one of the few credible income-generating options with clear ties to the AI revolution. Said another way, investors hoping for some upside to go along with the QQQI income stream are making an indirect AI bet and for now, that’s not a bad thing.
“AI has become one of the most important drivers of technology spending,” added US Bank. “Companies are directing billions of dollars toward AI-related capital expenditures, especially in compute infrastructure and data centers, which has supported semiconductor and component suppliers. At the same time, investors are watching closely to see how quickly those investments turn into durable revenue and profit growth.”
Pullback Protection
QQQI’s steady monthly income could also be a source of protection if market participants fret that AI stocks are too richly valued or due for short-term pullbacks.
“Technology stocks have delivered strong long-term returns, but they also tend to fluctuate more than the rest of the market. Recent quarterly results have generally supported higher stock prices, which have helped sustain confidence in the sector. Even so, elevated expectations mean investors should stay realistic about the risk of pullbacks when growth slows or sentiment changes,” concluded US Bank.
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