The performance of tech stocks was disappointing in 2022, ending a lengthy run of leadership by the largest sector in the S&P 500, but the group remains a hub of innovation, confirming long-term investors have a lot to look forward to.
With that, there are implications for a variety of exchange traded funds, including the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). Both ETFs follow the Nasdaq-100 Index (NDX), confirming they’re homes to companies that are leaders when it comes to disruptive and innovative technologies.
That’s something to consider this year because while it remains to be seen how tech stocks and ETFs will perform, it’s clear that some important tech trends could gain momentum as 2023 unfolds. Those include the evolution of fintech, healthcare, and industrial companies further embracing innovative tech and increased connectivity, among other themes.
“We’re in the very early innings of a multi-decade development in data, analytics capabilities, and software within specific industries,” said Lauren Ares, a Morgan Stanley banker specializing in B2B information services and data analytics. “Businesses are vying to become top-three market leaders in the sectors where they are focused, and investors are looking where to place their bets.”
Digital infrastructure, which is a core competency for many QQQ and QQQM member firms, is one area that could see a significant evolution in 2023. Increased data consumption as well as further deployment of 5G technology, among other factors, could propel select Nasdaq-100 names this year.
“While the investment case for digital infrastructure continues to be very strong and demand for quality assets is high, companies and investors are carefully scrutinizing the impact of inflation, power prices, and the risk of recession, including if and how certain cost drivers can be passed through to customers,” noted Max Thiele, a Morgan Stanley banker who specializes in digital infrastructure.
Healthcare and corporate streamlining are among the other areas in which QQQ and QQQM components could make inroads this year. At the corporate level, companies are looking to bring more efficiencies to enterprise resource planning (ERP) and human resources (HR), which could stimulate demand for cloud computing and artificial intelligence – both of which are highly relevant to some of the stocks held by QQQ and QQQM.
“Emerging technology in industrials, insurance, healthcare, digital infrastructure, and enterprise resource planning is enabling the exchange of data across value chains, and investors are monitoring companies that help connect data across disparate sources in specific sectors. Given the demand for these solutions, big companies and private equity firms are on the hunt for acquisitions to increase their market share within industry verticals,” concluded Morgan Stanley.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.