For over a decade now, betting against large-cap growth stocks has been a fool’s errand. Value stocks have been left in the dust by benchmarks such as the Nasdaq 100 Index (NDX) and the Russell 1000 Growth Index.
During the past decade, the Russell 1000 Growth gauge notched returns that led to a compound annual growth rate of 16%. That easily bested the S&P 500. And NDX, which is tracked by the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), generated jaw-dropping returns of its own. For the three years ending Dec. 11, both Invesco exchange traded funds slightly topped the S&P 500.
The impressive long-term returns offered by large- and mega-cap growth equities and ETFs like QQQ and QQQM have prompted some market participants to speculate as to when the good times will end or when value will come back into style. Regarding the first point, the answer might just be “not anytime soon,” indicating 2025 could be another fine time in which to own QQQ or QQQM.
QQQ Can Extend Leadership in 2025
The Magnificent Seven cohort (Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Meta Platforms, and Tesla) are largely responsible for the supremacy of large-cap growth in recent years. That’s good news for long-term investors who’ve engaged with QQQ and QQQM. And that’s because the Invesco ETFs allocate more than 43% of their weights to those stocks.
The dominance of the Magnificent Seven has prompted ample conversation about concentration, particularly in passive index funds tracking NDX and the S&P 500. But even if other growth names make contributions to the cause, that doesn’t imply the Magnificent Seven are in for downside.
“[We] doubt that the concentrated outperformance we have seen can [continue. But] this does not necessarily mean that these stocks will all underperform the broader market,” noted Chris Fay of BNP Paribas. “Rather, we believe that allocating overweight positions to only a few of the names and underweighting the others allows us to make room for other sectors and ideas.”
Seven stocks accounting for more than 43% of an ETF’s roster doesn’t fit the bill as “diverse.” But that doesn’t mean QQQ and QQQM can shine again in 2025. Arguably, the ETFs are candidates to be 2025 winners due to their leverage to the AI trade. That trade is nearly unparalleled among broad market ETFs.
“Within the technology sector, we expect AI to continue to advance as a theme in 2025 and beyond. The sector’s leadership will broaden to include companies that provide semiconductors (going beyond well-known early winners such as NVDA), networking and storage systems, database software, and software applications that embed AI functionality,” added Fay.
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