QQQ, QQQM Are Epicenters of Innovation | ETF Trends

If there’s one thing the Nasdaq-100 Index (NDX) is known for, it’s being home to an array of companies with innovative properties. That’s a trait that has served investors well. And that’s because NDX has significantly outperformed more basic domestic equity gauges over the long term. NDX’s legacy of innovation is accessible via the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).

Those exchange traded funds are higher by 54% year to date. Those gains were fueled in part by the funds’ status as home to an assortment of disruptive, innovative companies.

Much of the upside delivered this year by QQQ and QQQM is attributable to the magnificent seven. Those companies are  Apple (AAPL), Alphabet (GOOGL), Meta Platforms (META), Amazon.com (AMZN), Nvidia (NVDA), Microsoft (MSFT), and Tesla (TSLA). That group had scintillating gains in 2023. So it’s appropriate for investors to ponder the ability of those beloved stocks to replicate 2023 showings next year. Obviously, past performance isn’t a guarantee of future returns. But some of those names could drive QQQ and QQQM higher in 2024.

QQQ, QQQM Components Could Be 2024 Winning Ideas

Morningstar recently unveiled its list of best stocks to own in 2024. This group includes 18 names from the Morningstar Exponential Technologies Index. That’s relevant because there’s overlap between that gauge and NDX.

Perhaps surprisingly, Microsoft is the only member of the magnificent seven that appeared on the research firm’s list. But that’s not bad news for QQQ and QQQM. That’s because several other of the ETFs’ marquee components could prove to be winning ideas next year. That includes semiconductor giant Broadcom (AVGO). At a weight of 4.18%, that’s the third-largest tech holding in QQQ and QQQM, behind only Apple and Microsoft.

“Going forward, we see Broadcom benefiting from moderate, steady growth from data center networking, Apple unit sales, and upselling for its software customers. We believe artificial intelligence will become a material organic driver to the networking business, as applications like large language models require advanced network switching, where Broadcom’s chips are best-of-breed,” noted Morningstar analyst William Kerwin.

Among the other members of the Morningstar Exponential Technologies Index that also reside in QQQ and QQQM that could be stars in 2024, Morningstar lists Dow component Cisco Systems (CSCO), Analog Devices (ADI), and Texas Instruments (TXN) as names with potential to stock tech sector upside. That trio combines for about 3.6% of the QQQ/QQQM portfolios.

Credit Karma and TurboTax parent Intuit (INTU), which accounts for 1.39% of the ETFs’ rosters, is another name highlighted by Morningstar as a potential tech winner in 2024.

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