There’s no denying that a small number of mega-cap growth stocks, including Microsoft (MSFT), Nvidia (NVDA), Meta Platforms (META), and Alphabet (GOOG), have propelled broader equity gauges higher this year. The big reason why is artificial intelligence (AI).
That’s been to the benefit of investors holding those stocks, a select few others, and ETFs like the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). Buoyed by some of the largest AI exposure among all broad market ETFs, QQQ and QQQM are higher by nearly 23% YTD. Both funds are residing around record highs.
Those are impressive stats, to be sure. But some experts believe it’s possible market breadth will widen in the second half of 2024. That doesn’t necessarily mean AI equities, including those residing in QQQ and QQQM, will decline. Rather, it’s possible some non-AI themes could finally get the appreciation they deserve. The Invesco ETFs offer relevant positioning on those fronts.
2 Non-AI Themes Could Lift QQQ, QQQM
By now, many investors know that many semiconductor stocks, including some held by the Invesco ETFs, are being supported by AI. However, not all chipmakers are yet direct AI winners. But there are some other themes that could lift those stocks.
“Within this cyclical industry, automobile-related semiconductors have been the best performers as of late. However, depressed areas like personal electronics, communications and enterprise, may soon bounce back as demand is reinvigorated off low levels left behind by pandemic ‘over-ordering’, underscoring that semiconductor opportunities exist outside of AI,” noted Jack Manley, global market strategist at J.P. Morgan Wealth Management.
A surprise sector could be another catalyst for QQQ and QQQM in the months ahead. The ETFs allocate over two-thirds of their rosters to the technology and communication services sectors. But the funds’ relatively diminutive 4% weight to industrials should not be ignored.
The reasoning is simple: QQQ and QQQM have some exposure to freight and railroad operators. Those are corners of the industrial sector that could gain momentum in the second half. Interestingly, those industries are AI adopters and beneficiaries.
“Strong wage growth and recession fears acted as headwinds to freight, but unexpected economic resiliency and the growing need to move materials associated with fiscal stimulus and AI should be a catalyst for outperformance. Automation has also significantly improved efficiencies,” added Manley.
The strategist also extolled a preference for goods-related names. Those names could support the outlook for QQQ and QQQM. That’s because the ETFs devote nearly 19% of their portfolios to the two consumer sectors.
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