Artificial intelligence (AIs) stocks and the related exchange traded funds remain among this year’s best-performing assets. However, in recent days, some AI equities and ETFs cooled off a bit. Analysts don’t expect that thaw to last long.
In fact, some market observers believe that already-hot AI stocks could be drivers of broader market upside in the second half of the year. That could prove to be good news for ETFs that, while not dedicated to the AI theme, are heavy on some of the marquee stocks in the group. That includes the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
Both ETFs follow the Nasdaq-100 Index (NDX), which is higher by 34.32% year-to-date as of June 26. That’s a clear sign the benchmark is benefiting from exposure to AI-adjacent stocks such as Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Alphabet (NASDAQ: GOOG), among others.
Those AI names and other tech stocks could be among the contributors to more upside for equities in the second half of 2023, according to Wedbush analyst Dan Ives.
Ives’ Outlook Could Spur QQQ, QQQM Holdings
For investors that feel as though they missed out on much or all of the AI ebullience through the first six months of the year, the good news is that many analysts, including Ives, believe there’s plenty more gas in the tank for AI stocks.
“Heading into the second half of 2023 we see a much broader tech rally ahead as investors further digest the ramifications of this $800 billion AI spending wave on the horizon and what this means for the software, chip, hardware, and tech ecosystem over the next year,” the Wedbush analyst said in a Monday report to clients. “The 2nd, 3rd, and 4th derivatives of this AI Gold Rush are just starting to evolve for the tech landscape based on our recent work in the field.”
In addition to the aforementioned QQQ and QQQM member firms, Ives believes AI will benefit other companies, including Adobe (NASDAQ: ADBE), Apple (NASDAQ: AAPL), and Facebook parent Meta Platforms (NASDAQ: META), to name a few. That trio combines for over 18% of the QQQ and QQQM portfolios.
For investors that are fretting about rich valuations on AI stocks, including some QQQ and QQQM holdings, Ives believes that the dawn of a new, AI-fueled bull market overshadows those concerns.
“While bears will continue to fret about tech valuations and the uncertain macro backdrop, we believe this ultimately is the start of a new tech bull market we see heading into 2024 being driven by this AI revolution coupled with a stabilizing IT spending environment,” concluded the analyst.
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