High interest rates and investors’ desire to see strong balance sheets, buybacks or dividends can act as headwinds to corporate technology expenditures, but there’s no getting around the point that some of those expenditures are essential. Put artificial intelligence (AI) in the “essential” category.
Chief technology officers (CTOs) know as much and their rising commitments to artificial intelligence spending could positive long-term implications for exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
The Invesco ETFs, both of which track the Nasdaq-100 Index (NDX), are highly relevant in the AI spending conversation because the funds count an assortment of artificial intelligence enablers among their holdings. Think companies such as Nvidia (NVDA), Amazon.com Inc. (AMZN) and Microsoft (MSFT), among others. With AI adoption still in its early innings, the same is true of related spending, indicating QQQ and QQQM could be in for long-term growth.
For Some QQQ/QQQM Holdings, AI Spending Looks Good
AI spending trends aren’t linear from one company to another, but the latest edition of the CNBC Technology Executive Council bi-annual survey confirms a robust overall outlook for AI-related expenditures and that could be potent for QQQ and QQQM.
“Sixty percent of the select group of companies responding to the survey described generative AI as critically important to their business, and artificial intelligence is the single-largest technology spending budget line item for the next year at 44% of companies. Sixty percent of survey respondents described their new AI investments as ‘accelerating,” reportsed Eric Rosenbaum for CNBC.
In another potential positive for artificial intelligence-related companies dwelling in QQQ and QQQM, the CNBC surveyed revealed that the top concern among tech executives is providing customers with access to new technology. AI undoubtedly fits that bill, underscoring the point that there is credibility to artificial intelligence spending trends.
Speaking of credibility, as valuations on some AI equities, namely Nvidia, have soared, some market participants have likened the recent AI boom to the bursting of the tech bubble in 2000. However, some analysts say that comparison doesn’t mesh because many companies that didn’t survive the tech bubble had suspect business models and flimsy balance sheets. The opposite is true of the bulk of the AI-related stocks that call QQQ and QQQM home. Other fundamentals bode well for Nvidia.
“Nvidia became the most valuable company in the market this week, Bank of America says gen AI is just in the second year of a three to five year deployment cycle, with hardware demand forecast to triple to $300 billion — up from $100 billion this year, with 80% of that going to Nvidia,” noted CNBC.
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