Recent weakness aside, 2024 will go down as another banner year for large-cap growth stocks. The artificial intelligence (AI) theme once again figures prominently into that equation. That’s been good news for the Nasdaq 100 Index, which is followed by the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). Those exchange traded funds sported year-to-date gains of 26.65% as of December 20 — ascents helped in large part by the funds’ status as prime plays on AI.
Another encouraging sign is that QQQ and QQQM performed against what could’ve been a challenging backdrop for AI stocks. Analysts and investors spent considerable time in 2024 lamenting valuations on AI equities. At the same time, many market participants have also intensified demands for AI results, moving beyond hope and hype. Those issues are likely to remain front-and-center next year. The good news is that the Invesco ETFs are homes to some of the best AI stocks.
QQQ Has Impressive AI Roster
Morningstar recently published its list of the best AI stocks to own now. Five of the six names are members of the QQQ/QQQM roster. Several of those five are highly familiar mega-cap tech stocks, including Microsoft (MSFT) — the second-largest holding in the Invesco ETFs.
“Microsoft is one of two public cloud providers that can deliver a wide variety of PaaS/IaaS solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in AI,” noted Morningstar analyst Dan Romanoff. “Microsoft has also enjoyed great success in upselling users on higher priced Office 365 versions, notably to include advanced telephony features. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers.”
Google parent Alphabet (GOOG), whose two share classes combine for over 5% of the QQQ/QQQM lineups, is another example of well-known mega-cap growth stock that’s viewed by investors an AI leader and it’s attractively valued.
“We consider Google an AI front-runner, and its investments in AI are a continuation of the effort to safeguard its core product, Google Search. By leveraging generative AI, Google can improve both its own search quality and its advertising business. Google’s own generative AI offerings, such as Gemini, can avert any major customer/advertiser churn,” according to Morningstar.
Advanced Micro Devices (AMD), Adobe (ADBE) and Cognizant Technology Solutions (CTSH) are the other QQQ/QQQM holdings found on the research firm’s best AI stocks to own list.
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