When it comes to large- and mega-cap stocks benefiting from the artificial intelligence (AI) craze, Alphabet (NASDAQ: GOOG), Microsoft (NASDAQ: MSFT), and Nvidia (NASDAQ: NVDA) are among the obvious choices.
That’s been a boon for exchange traded funds with noteworthy exposure to those names, including the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). The good news on the AI for QQQ and QQQM doesn’t end with the aforementioned names. These ETFs are both homes to 101 stocks, meaning the relevant AI exposure is more expansive than meets the eye.
Take the case of Dow component Cisco Systems (NASDAQ: CSCO) – a mature tech company that accounts for 1.93% of the QQQ and QQQM portfolios. Owing to that maturity and its reputation as the king of the network equipment space, many investors may not view Cisco as an AI play. It is, and the stock is inexpensive.
“One other clear piece of good news: Cisco said that it has had more than $500 million in orders to date for hardware targeted at generative AI-related data centers,” reports Eric Savitz for Barron’s.
Two QQQ Chip Names with AI Inroads
When it comes to semiconductor companies residing in QQQ and QQQM that are widely as AI winners, one name usually comes to mind: Nvidia. Some of that enthusiasm has trickled down to Advanced Micro Devices (NASDAQ: AMD) – Nvidia’s nearest rival – and that’s been to the benefit of QQQ and QQQM investors because those stocks combine for almost 6% of the ETFs’ roster.
However, QQQ and QQQM are homes to many more semiconductor equities, including some that are legitimate AI plays in their own rights. Those include Broadcom (NASDAQ: AVGO) and Marvell Technology (NASDAQ: MRVL). JPMorgan analyst Harlan Sur is among those bullish on those two stocks as AI plays.
“Sur expects the overall high-end ASIC market will grow by 20% annually going forward. According to the analyst, Broadcom is the market leading player with a 35% share, followed by Marvell at 12%. Since June, he believes Broadcom has won two or three major new custom chip projects, while Marvell has captured another one or two deals,” writes Tae Kim for Barron’s.
ASICs, or application-specific integrated circuits, are the customized chips that are foundational pieces in generative AI, among other AI applications. Sur doesn’t cover Broadcom, but he has an “overweight” rating on Marvell. The two stocks combine for 3.41% of the QQQ and QQQM lineups.
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