These days, it's not unreasonable for investors to feel as if there's one word attached to AI: "bubble.†AI bubble talk is increasing in frequency, as are comparisons to the internet bubble of 2000. Also adding to the case for QQQ and QQQM is that today's valuations on AI stocks look attractive relative to internet stocks 25 years ago. "We believe the AI theme is not yet in bubble territory. Expectations for the leaders of AI are high, but valuations remain reasonable. However, we are aware of and monitoring ...

Core Viewpoint - Market participants are increasingly concerned about the performance of growth stocks, particularly among major tech companies, as reflected in the declining prices of ETFs like Invesco QQQ Trust (QQQ) and Invesco NASDAQ 100 ETF (QQQM) over the past month [1] Group 1: Profit Margins in the Tech Sector - Despite market jitters, some analysts argue that tech investors should focus on the strong profit margins within the sector, which is the largest exposure in the Invesco ETFs [2] - The blended net profit margin for the S&P 500 in Q3 2025 is reported at 13.1%, surpassing previous quarters and the five-year average, marking the highest level since at least 2009 [4] - The tech sector led the year-over-year profit margin increase in Q3 among the 11 sectors in the S&P 500, benefiting ETFs like QQQ and QQQM that are heavily weighted in tech [4] Group 2: Sector Performance and ETF Composition - Energy and healthcare sectors reported Q3 profit margins significantly below their five-year averages, but these sectors make up less than 5% of the QQQ/QQQM portfolios, which is advantageous for these ETFs [5]

Experienced market participants know the early innings of the AI investing thesis have largely been marked by hardware; namely, semiconductors. It's a key reason Nvidia (NVDA) is the first artificial intelligence stock that comes to many investors' minds. For more news, information, and strategy, visit the ETF Education Content Hub. In the artificial intelligence software realm, there are three critical categories. Those are applications, infrastructure, and platforms. Focusing on artificial intelligence in ...

Core Insights - Despite recent pullbacks in big-name growth stocks, particularly those linked to AI, the investment thesis for AI remains strong [1] - AI continues to be a high priority for companies and professional investors, as highlighted at the BlackRock 2026 Outlook Forum [2] Group 1: AI Demand and Market Dynamics - The discussion at the BlackRock forum emphasized the physical constraints in AI buildout, including compute, materials, and energy, with significant future power demand estimates for AI data centers and chips [3] - Concerns about the viability of AI spending and the potential bubble in valuations of AI-linked stocks are prevalent among investors [4] Group 2: Valuation Comparisons - The S&P 500 Technology Index currently trades at 42x earnings, which is high but lower than the 67x seen during the internet bubble 25 years ago, suggesting a more favorable valuation environment for AI investments [6] - Technology companies today exhibit better quality traits, with the S&P 500 Technology Index showing an average return on equity of 30%, compared to a long-term average of 20% [7]

Group 1 - AI continues to be a significant theme for investors and technology enthusiasts, with expectations for increased focus in 2026 [1] - The rapid evolution of AI, particularly through language learning models (LLMs), is expected to enhance adoption rates, benefiting companies within the QQQ and QQQM portfolios [2] - The computational power for training AI models is increasing significantly, with American labs reportedly gathering about 10 times the computational power for their next models [3] Group 2 - Over the past three years, QQQ and QQQM have posted an average return of approximately 127%, outperforming the S&P 500's 81.7% return [4] - There is potential for QQQ and QQQM to generate further upside in 2026, despite skepticism from some investors [4] - The adoption of AI at the industry level, particularly in sectors like financial services, is crucial for the growth of AI equities in 2026 [6] Group 3 - Financial services can significantly benefit from AI, as it streamlines processes that involve handling large amounts of paperwork [7]

Core Insights - The third-quarter earnings season is revealing a divide between growth companies, with some showing strong performance while others lag behind [1] - Invesco QQQ Trust (QQQ) and Invesco NASDAQ 100 ETF (QQQM) are benefiting from a higher concentration of successful tech earnings [1][2] Group 1: AI Investment Trends - QQQ and QQQM are recognized as leading proxies for AI investing, with a shift in market sentiment favoring companies that demonstrate profitable and efficient AI utilization [2] - The enthusiasm for AI investments is transitioning to a focus on tangible results rather than speculative spending [6] Group 2: Notable Companies - Alphabet (GOOG) is highlighted as a strong performer, accounting for 6.60% of QQQ/QQQM, with its monetization strategy leading to record-high share prices [3][5] - Amazon (AMZN), the largest consumer discretionary holding in the ETFs, is expected to generate significant attention during the holiday season, particularly through its Amazon Web Services (AWS) unit [4]

Group 1: ETF Inflows - Investors invested $37.6 billion into U.S.-listed ETFs during the week ending October 31, indicating strong inflows despite a hawkish tone from the Federal Reserve [1] - U.S. equity ETFs led inflows with $19.3 billion, followed by U.S. fixed income funds at $8.7 billion, international equity ETFs at $8.6 billion, and international fixed income products at $2.2 billion [1] Group 2: Market Conditions - The macro backdrop remained supportive with stocks near record highs, driven by strong gains in technology stocks such as Nvidia and Amazon [2] - The Federal Reserve cut rates as expected, but Chair Jerome Powell's comments suggested a December rate cut was not guaranteed, diverging from market expectations [2] - Futures markets indicate a 67% chance of another rate cut next month, down from pre-meeting levels [2] Group 3: Top Performing ETFs - The SPDR S&P 500 ETF Trust (SPY) saw the highest inflows with $4.4 billion, followed by the Vanguard Information Technology ETF (VGT) with $2.1 billion, and the Invesco NASDAQ 100 ETF (QQQM) with over $1 billion [4] - On the fixed income side, the JPMorgan Municipal ETF (JMUB) led with $1.9 billion in inflows [4] Group 4: International ETFs - The Vanguard FTSE Developed Markets ETF (VEA) and the JPMorgan BetaBuilders Europe ETF (BBEU) had notable inflows of $805 million and $757 million, respectively [5] Group 5: ETF Outflows - The iShares Russell 2000 ETF (IWM) experienced $1.8 billion in redemptions as small caps underperformed large caps [6] - The Direxion Daily Semiconductor Bull 3x Shares (SOXL) saw $1.3 billion in outflows as traders took profits after a rally in semiconductor stocks [6] - The SPDR Gold Shares (GLD) and the iShares 0–3 Month Treasury Bond ETF (SGOV) each had about $1 billion in redemptions, reflecting profit-taking and a dip in demand for ultra-short Treasuries [7]

Group 1 - The AI investment theme continues to be significant in 2025, benefiting market participants with exposure to AI-related equities and ETFs [1] - The Invesco QQQ Trust (QQQ) and Invesco NASDAQ 100 ETF (QQQM) are experiencing year-to-date gains of approximately 20%, attributed to their status as prime AI proxies [2] - Despite skepticism regarding the sustainability of AI-related spending, the price performance of QQQ and QQQM suggests that betting against AI-intensive assets has been unwise [3] Group 2 - AI is increasingly recognized as a key driver of economic growth, with a small number of large AI-related stocks significantly influencing broader market returns [4] - By Q4 2025, AI is projected to surpass U.S. consumer spending as the primary growth driver, with upward revisions in spending intentions among major U.S. tech firms [5] - The investment opportunity in AI is dynamic, with ETFs like QQQ and QQQM providing flexibility and exposure to AI enablers across various sectors, including financial services, healthcare, and industrials [6] Group 3 - The technology sector is well-positioned for continued growth beyond current leaders, as AI development is still in its early stages and advancing rapidly [7]

Core Insights - The AI industry is currently experiencing bubble discussions similar to the late 1990s internet stocks and the 2006 housing market [1][2] - Investors are questioning whether the current AI stock rally will be different from past bubbles, but there are positive indicators for those invested in AI-focused ETFs like QQQ and QQQM [2][3] Profitability and Cash Flow - Unlike the dot-com bubble, today's AI rally is supported by real earnings growth, with many AI-intensive companies showing strong profitability [4] - The S&P 500 technology sector has a free cash flow (FCF) margin of approximately 20%, more than double the levels seen during the late 1990s and early 2000s, indicating robust financial health among leading firms [6] Concentration and Growth - The concentration of investments in quality companies, referred to as the "Magnificent Seven," has resulted in significant year-over-year earnings growth of 27% in Q1 and 26% in Q2, with Q3 estimates suggesting a further 14% increase [7] - This contrasts sharply with the remaining 493 companies in the index, which are projected to show only 5% growth, highlighting the strength of the leading firms driving the market's earnings [7]

Core Viewpoint - The recent market downturn, particularly in the Nasdaq-100 and S&P 500, was driven by President Trump's threat of 100% tariffs on China, resulting in significant losses for major tech ETFs like QQQ and QQQM, which collectively lost $770 billion in market capitalization in one session [1]. Group 1: Market Reaction and Opportunities - Despite the sharp decline, experts suggest that this may not indicate a bear market or a full correction, and could present buying opportunities for investors [3]. - Investors who are under-allocated to equities are encouraged to phase in and utilize market dips to increase exposure to preferred sectors, particularly in structural growth themes like AI [4][7]. - The chief investment office of UBS highlights U.S. tech stocks as a preferred investment area, which is significant for QQQ and QQQM given their substantial exposure to the tech sector [5]. Group 2: Investment Strategies - A disciplined approach to gradually increasing stock exposure or balanced portfolios may help mitigate risks associated with poor timing and emotional decision-making, while also capitalizing on market dips and rebounds [6]. - UBS believes that lower interest rates, strong earnings growth, and AI trends will support further gains in global equities over the next year, reinforcing the case for investors to consider increasing their stock allocations [7].