Should You Buy the Invesco QQQ ETF During the New Nasdaq Bull Market? History Offers a Clear Answer.

Globe and Mail

3 days ago

Key Points
The Invesco QQQ ETF tracks the performance of the Nasdaq-100 index, which is packed with high-growth technology stocks.
The Nasdaq-100 plunged into a bear market in April, but it has since made a full recovery led by the "Magnificent Seven" stocks.
The Invesco ETF could be a great buy right now for long-term investors, even though it's trading near a record high.
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The Invesco QQQ Trust (NASDAQ: QQQ) is an exchange-traded fund (ETF) that tracks the performance of the Nasdaq-100 index by holding the same stocks and maintaining similar weightings. That means it offers investors a high degree of exposure to the "Magnificent Seven" companies, which operate at the cutting edge of high-growth areas like artificial intelligence (AI).
The Nasdaq-100 slipped into a bear market in April following the announcement of President Donald Trump's "Liberation Day" tariffs, which threatened to set off a global trade war. But the president quickly walked back the most aggressive aspects of his tariff plan to make way for negotiations with America's top trading partners, so the stock market rapidly recovered. The Nasdaq-100 even set a new all-time high in June, which marked the beginning of a new bull market.
Now that the Nasdaq-100 has momentum on its side, should investors buy the Invesco QQQ ETF? History offers a very clear answer.
The Magnificent Seven stocks are key, but they aren't the whole story
The Magnificent Seven are Nvidia, Microsoft, Apple, Amazon, Meta Platforms, Alphabet, and Tesla. They make up 43.6% of the value of the Invesco QQQ ETF's entire portfolio, so they are impossible to ignore.
The Nasdaq-100 has soared by 33% since it bottomed on April 8, but the Magnificent Seven stocks have delivered an average return of 40% over the same period, so they played a major role in pulling the index out of its recent bear market.
NVDA data by YCharts.
Together, those seven companies are leading almost every facet of the AI race, from hardware to software. However, a number of other AI stocks in the Nasdaq-100 have the potential to outperform the broader market, and here are five that I consider the most noteworthy:
Broadcom
Palantir Technologies
Advanced Micro Devices
Micron Technology
CrowdStrike Holdings
Broadcom is a leading supplier of networking equipment for data centers, but it's also experiencing significant demand for its AI accelerators. These chips can be customized to suit the needs of the company's hyperscale customers, unlike Nvidia's industry-leading graphics processing units (GPUs), which are sold as-is. Broadcom says at least three customers are aiming to deploy 1 million AI accelerators each in 2027, creating an opportunity worth up to $90 billion for the company.
AMD and Micron are also AI hardware powerhouses. The former developed a GPU architecture called Compute DNA 4 (CDNA 4) that rivals Nvidia's Blackwell architecture, and it will ramp up chip production in the second half of this year. The company is also a top supplier of AI chips for personal computers, which could be a significant growth market in the future.
Micron, on the other hand, supplies memory chips that are crucial in AI workloads, and its latest HBM3E technology can be found in Nvidia's Blackwell GPUs.
Palantir is one of the hottest players in the AI software space, with its stock soaring by 520% over the past year alone. It might be overvalued right now, but the company's three software platforms are increasingly popular among private enterprises and the government. Using AI, they process high volumes of data and extract valuable insights that can be used to make crucial operational decisions.
Lastly, CrowdStrike is a leader in AI-powered cybersecurity. The company's Falcon platform is one of the only all-in-one solutions on the market, covering cloud security, identity management, end-point protection, and more. Falcon automates the threat detection and response processes using AI, resolving issues rapidly with little need for human intervention.
History suggests this could be a great time to buy the Invesco ETF
The Invesco QQQ ETF was established in 1999, and the Nasdaq-100 has endured seven bear markets since then -- that's an average of one every three and a half years! But even after accounting for each of those sharp sell-offs, the ETF has still delivered a compound annual return of 10.2% over the last 26 years.
Each Nasdaq-100 bear market had a different trigger; there was the dot-com bust in 2000, the global financial crisis in 2008, and the tariff turmoil this year, to name just a few. Nevertheless, the index overcame them all to consistently set new record highs, which is evidence of its incredible resilience.
My point is, buying the Invesco QQQ ETF now with the Nasdaq near a record high might sound daunting, but history suggests timing has very little impact on investors' ability to earn a positive return over the long run. That might be especially true today considering AI is likely to be a driver of tech-sector returns for several years to come.
Nvidia CEO Jensen Huang thinks data center spending will top $1 trillion per year by 2028, as each new generation of AI model consumes more computing power. The estimates on the software side are even larger; Cathie Wood's ARK Investment Management predicts AI could create a $13 trillion opportunity in the software industry, which will drive a productivity boom worth $117 trillion among knowledge workers (like engineers, lawyers, and information-technology professionals).
Investors who buy the Invesco QQQ ETF will have broad exposure to those opportunities, saving them from having to pick winners and losers among a sea of individual AI stocks. Therefore, it could be a great buy right now for anyone who is willing to hold it until at least 2030, and preferably beyond.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, CrowdStrike, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.