Technology, the largest sector weight in a slew of cap-weighted, broad market equity benchmarks, roared back to life in the second quarter following a rough start to 2025. Some analysts view the group as fairly valued following that rebound, but it also remains home to an array of opportunity.
Those tailwinds underscore the case for ETFs like the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). Those ETFs allocate 53.41% of their rosters to tech stocks, confirming the resurgent nature of tech equities. The Invesco ETFs are higher by 24.66% over the past 90 days. Fortunately, that showing isn’t stoking broad-based calls regarding rich multiples.
In fact, Morningstar analyst Dan Romanoff describes tech stocks as “fairly valued.” While he acknowledges the group has “little margin of safety,” he adds the sector currently isn’t littered with stocks that are overtly over- or undervalued.
Technology Tailwinds Remain
While tech currently isn’t a bargain hunter’s paradise, the other positive for investors considering ETFs like QQQ and QQQM is that there are plenty of catalysts to go around. Those include various industry-level themes that could propel various members of the QQQ/QQQM portfolios higher in the months ahead.
“Our confidence in secular tailwinds, such as cloud computing, artificial intelligence, and the long-term expansion of semiconductor demand, remains unchanged,” observed Romanoff.
Much of the case for tech investing revolves around the sector’s various tactical opportunities. That spotlights the utility of QQQ and QQQM because those ETFs feature exposure to multiple, high-growth themes. And that means investors don’t have to commit to a single opportunity set.
“We still see targeted investment opportunities. Generative AI remains the most prominent theme,” added Romanoff. “Software firms are developing and incorporating next-gen AI capabilities into their solutions, while cloud providers are introducing new services and increasing capacity. Meanwhile, some semiconductor firms, such as Nvidia, are seeing surging demand for AI and data center chip applications.”
Two of the analyst’s top three tech picks — Microsoft (MSFT) and NXP Semiconductors (NXPI) — are QQQ/QQQ members, with the former being the ETFs’ second-largest component. Microsoft, a Magnificent Seven member, gets plenty of attention. But NXP could be an underrated part of the QQQ/QQQM rosters.
“We’re especially fond of the firm’s outsize exposure to the automotive end market, where it obtains nearly 50% of its revenue,” concluded Romanoff. “We believe the company will also gain market share in electrification and safety automotive products, including radar and battery management systems. NXP’s auto business is well tied to the secular tailwinds around rising chip content per vehicle.”
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