When the closing bell sounds today, tech will once again rank as one of the best-performing sectors annually. The largest sector in the S&P 500 has held that status for an extended period of time.
Tech’s long-running dominance has prompted speculation as to when the good times will end. But heading into 2025, the prevailing wisdom among many market observers is that investors shouldn’t bet against big tech. Rather, they should bet on the sector. That’s an objective that can be efficiently accomplished with ETFs like the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
The ETFs have the same lineups, including a roughly 50% allocation to large- and mega-cap tech stocks. Alone the Magnificent Seven cohort of Alphabet (GOOG), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) — which also includes communication services and consumer cyclical names — account for about 43% of the QQQ/QQQM rosters.
Expect More Tech Dominance
QQQ and QQQM are concentrated in a small number of stocks. But that’s been to the benefit of investors. And that’s because, as deVere Group CEO Nigel Green points out, the combined market values of the Magnificent Seven exceed the GDP of all countries in the world aside from the U.S. and China.
Alone, that fun fact doesn’t imply those names and other tech stocks will soar again next year. But many of their mega-cap growth names have the fundamentals to extend their bullish ways next year.
“Big Tech’s consistent outperformance over the past decade is no accident,” observed Green. “Their ability to beat expectations time and again is a direct result of their relentless focus on innovation, diversification, and executing at scale.”
He added that “2025 will be another banner year” for the Magnificent Seven. He cited those companies’ dominant perches in tech segments that disruptive, innovative, and focal points have been reshaping the economy.
Green acknowledged some investors may be pensive about tech valuations and the specter of increased regulatory scrutiny. But in potential good news for QQQ/QQQM investors, those issues could be overshadowed by opportunities the ETFs’ major holdings can tap into.
“They are not only disrupting entire industries but also reshaping how we live and work. For forward-thinking investors, these firms remain a cornerstone of any growth-focused portfolio,” concluded Green.
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