Seeing the Tech Forest Through Trees of Volatility

Core Viewpoint - The Nasdaq-100 Index (NDX) has decreased by 3.36% over the past month, with many growth stocks underperforming, leading to concerns among retail investors about the sustainability of tech investments [1] Group 1: Market Performance - ETFs such as the Invesco QQQ Trust (QQQ) and Invesco NASDAQ 100 ETF (QQQM) have experienced pullbacks but are not in bear markets or correction territory [2] - Recent weakness in QQQ, QQQM, and similar ETFs is attributed to concerns regarding artificial intelligence (AI) spending and its long-term justification [3] Group 2: Investment Trends - Businesses are significantly investing in technology to enhance productivity, with a shift towards business-to-business investments [4] - Valuation concerns regarding AI-related large- and mega-cap stocks are considered likely overblown, as current valuations are not as stretched as those seen in the tech bubble 25 years ago [5] Group 3: Long-term Outlook - Long-term valuations for tech stocks appear reasonable, with no immediate signs of significant earnings retrenchment or major inflation spikes that could raise concerns [6] - Technology and communications services, the largest sector exposures of QQQ and QQQM, continue to be innovation hubs and have outperformed the broader market in recent years [7] Group 4: Historical Performance - The communications services and information technology sectors have consistently outperformed the S&P 500, with a hypothetical $100,000 investment in these sectors growing to over $480,000 by 2025, significantly surpassing the overall S&P 500 return [8]