Disruptive growth and megatrends are alive and well, although the underlying investment thesis is beholden to macroeconomic headwinds, such as consumer spending and central bank monetary policy.
Those factors, among others, speak to the viability of long-term investing as the appropriate way of approaching innovative growth. They also highlight the potential advantages of eschewing stock picking in favor of more passive approaches, such as exchange traded funds. Enter the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
Both Invesco ETFs follow the Nasdaq-100 Index — a benchmark with a history of including innovative growth companies. That tradition continues today, indicating that it’s possible for large- and mega-cap companies to not only spur, but lead technological disruption and innovation.
The ETFs remain pertinent today because they offer breadth across the sectors leading disruption — technology, communication services, and consumer cyclical. Looked at differently, QQQ and QQQM provide investors with passive entries into a variety of compelling secular growth stories, including artificial intelligence (AI), cloud computing, and cybersecurity.
“We believe generative AI will accelerate the adoption of AI to the point where it becomes ubiquitous. Machine learning AI is rising versus legacy rules-based AI, that is, AI models that learn from the data provided to them rather than from specific rules that are coded in,” noted BNP Paribas. “The change really began to accelerate around 2010 with the confluence of low-cost computing and storage, the existence of massive data sets, and advancements in algorithms within the AI field.”
Secular Growth In QQQ & QQQM’s Semis Exposure
Another advantage offered by QQQ and QQQM is the ETFs’ ability to provide investors with exposure to the intersection of various technologies with each other. For example, semiconductors are the foundations of myriad disruptive segments, including AI, electric vehicles, and renewable energy, among many more. The Invesco ETFs feature more than 15 chip stocks on their rosters.
“Semiconductor companies are trying to balance performance versus power consumption and are hitting some limitations with respect to Moore’s Law (the observation that the number of transistors in an integrated circuit doubles about every two years). Microchips are getting larger with each generation. This drives wafer demand faster than unit demand, which is positive for semiconductor capital equipment and materials companies in the long term,” added BNP Paribas.
Bottom line: Secular growth stories have long been catalysts for the tech investment thesis and that remains the case today. It’s also unlikely to change in the future, confirming the long-term utility of assets such as QQQ and QQQM.
“We continue to believe that the leaders and the beneficiaries of the digital transformation will deliver superior revenue growth, earnings, cash flows, and returns over a long-term investment horizon as companies strive to cut costs, operate more efficiently, and innovate to differentiate,” concluded BNP Paribas.
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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.
