With growth stocks scuffling this year, some investors may be apt to ponder the fate of various megatrends — many of which rose to prominence during the lengthy growth stock bull market.
This year’s growth stock weakness may be obfuscating the fact that some megatrends are alive and retain compelling long-term outlooks. That could signal opportunity with exchange traded funds that are heavy on innovative companies, including the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
For investors who are new to megatrends, broad approaches, such as those offered by QQQ and QQQM, are effective points of entry. While these ETFs are broad, they offer ample exposure to exciting trends, including artificial intelligence (AI) and cybersecurity.
As cyber threats increase, “so will the need for cybersecurity technologies, creating an industry ripe for innovation. Though it’s difficult for companies and investors alike to successfully navigate such a fast-moving field, outfits like CrowdStrike and Palo Alto Networks are already using artificial intelligence to anticipate threats,” according to Charles Schwab research.
Palo Alto Networks (NASDAQ:PANW) and Crowdstrike Holdings (NASDAQ:CRWD) are both holdings in QQQ and QQQM. The Invesco ETFs also hold other cybersecurity names.
The AI exposure offered by QQQ and QQQM is also relevant because AI serves as the foundation of a variety of other megatrends, indicating that its long-term growth runway is potentially lengthy and durable.
“It’s difficult to find an industry that isn’t likely to be disrupted by AI, which helps explain why global AI revenue is expected to grow tenfold4 to more than half a trillion dollars by 2023. How we live and do business will possibly be transformed in the years ahead—whether by self-driving vehicles or smart applications that learn from and respond to user behavior,” added Schwab.
QQQ and QQQM are also relevant against the backdrop of increased climate change spending, courtesy of the recently passed Inflation Reduction Act. Multiple members of both ETFs have direct leverage to a massive amount of incoming climate-related spending.
“Climate change could undercut global economic output by as much as 14%, or $23 trillion, over the next 30 years,” concluded Schwab. “That said, technological advances in clean energy could help reduce the world’s reliance on fossil fuels and potentially benefit investors.”
Both QQQ and QQQM hold 102 stocks, 50.65% of which hail from the technology sector.
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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.
