AI, ESG Come Together in This ETF | ETF Trends

With artificial intelligence (AI) accounting for a significant portion of broader market ebullience this year, some investors are pondering this disruptive technology’s environmental, social, and governance (ESG) implications.

More clarity will avail itself over time, but there are existing avenues through which market participants can access the potency of the AI investment thesis along with the benefits of ESG. Enter the Invesco ESG Nasdaq 100 ETF (QQMG). QQMG follows the Nasdaq-100 ESG Index, which is the ESG equivalent of the popular Nasdaq-100 Index (NDX). NDX is one of the premier destinations for investors seeking robust AI exposure in non-AI-dedicated large-/mega-cap indexes.

That much has been highlighted this year, as Microsoft (NASDAQ: MSFT) and Nvidia (NASDAQ: NVDA) are among the mega-cap names delivering AI-charged upside for investors. That duo make up QQMG’s largest and third-largest holdings, respectively, but there’s more to this ETF’s AI story.

QQMG Has Strong AI Exposure

Due to its ESG overlay, QQMG holds 92 stocks, or nine fewer than NDX. Said another way, QQMG excludes nine NDX member firms that don’t meet the ETF’s stringent ESG standards. This enhances QQMG’s AI profile.

Take the examples of semiconductor makers Nvidia and Broadcom (NASDAQ: AVGO), both of which command larger weights in QQMG than they do in NDX. Speaking of Broadcom, which is a top-10 holding in QQMG, that  stock is on a torrid pace this year and is gaining favor among analysts. Bank of America recently highlighted it as the “most underappreciated AI beneficiary,” while Piper Sandler mentioned it as one of the semiconductors winners from the AI boom.

The research firm said the same of Synopsys (NASDAQ: SNPS) and KLA Corp. (NASDAQ: KLAC), both of which are QQMG holdings. QQMG offers investors other benefits, namely the point that the bulk of its holdings are profitable and many sport sturdy balance sheets. Those are notable traits at a time when many market observers are speculating that a boom-bust-boom cycle could be the way things shape up in the AI space.

“Today’s ebullient news and performance in the technology sector echoes that of what took place in early 2000,” wrote Piper Sandler chief investment strategist Michael Kantrowitz in a report. “An ‘it’s different this time’ mentality is a commonality of an asset bubble, where investors extrapolate into the future and believe that negative outcomes will be avoided.”

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