Nasdaq ETFs Set for Further Growth in 2024

The tech-heavy Nasdaq Composite Index has been hitting a series of record highs in recent weeks, powered by technology stocks on artificial intelligence (AI) optimism and NVIDIA’s NVDA relentless rally. Renewed rate cut bets add to the momentum.

As such, the ETFs tracking the index are in focus. These include Invesco QQQ QQQ, Invesco NASDAQ 100 ETF QQQM, First Trust NASDAQ-100 Equal Weighted Index Fund QQEW, Invesco NASDAQ Next Gen 100 ETF QQQJ and Direxion NASDAQ-100 Equal Weighted Index Shares QQQE.

More Rally Ahead?

Most of the rally is driven by "Magnificent Seven." The three stocks — NVIDIA, Apple (AAPL), and Microsoft (MSFT) — in the "Magnificent Seven" group are in a race to become the world’s most valuable company and hit a market capitalization of $4 trillion on surging enthusiasm over AI capabilities (read: ETFs to Tap as NVIDIA Becomes the Most Valuable Company).

The expansion of AI applications holds the promise of ushering in fresh growth opportunities. According to a new report by Grand View Research, the global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030. NVIDIA has been at the forefront of building AI into its products and services. Its success is largely attributed to its leadership in developing advanced graphics processing units (GPUs), which are unmatched in producing processors that power artificial intelligence systems, including generative AI, the technology backing OpenAI’s ChatGPT that can create text, images and other media.

Apple, which was way behind its competitors in adopting AI, is finally catching up following the launch of the brand-new AI feature called Apple Intelligence for iPhones, iPads and Macs at its recent Worldwide Developers Conference. The introduction of numerous AI-powered features is expected to kickstart the next upgrade cycle, enhancing the company's performance and restoring investor confidence in Apple.

Meanwhile, Microsoft has invested billions of dollars into AI in a bid to turbocharge its growth, particularly its cloud computing services, and is now reaping the fruits. About 65% of Fortune 500 companies are using the Azure service that delivers OpenAI's technology to businesses. Demand for generative AI will continue to fuel Microsoft's cloud business. The software maker is now emphasizing AI transformation through its new offerings like Microsoft Copilot. “Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry," Microsoft CEO Satya Nadella said (read: Tech ETFs Faceoff: Apple Vs. Microsoft).

The Fed, in its latest meeting, penciled in one rate cut for this year and foresees four cuts in 2025. The central bank has altered the language in its statement, noting that there has been “modest further progress toward the committee’s 2% inflation objective.” Previously, the statement pointed to a “lack” of further progress. This signals a period of higher interest rates for a while. Tech titans have shown strong resilience amid such a scenario. And, when the Fed starts cutting rates later this year, technology stocks will receive a boost. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.

ETFs in Focus

Invesco QQQ (QQQ)

Invesco QQQ provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. It is one of the largest and most popular ETFs in the large-cap space, with an AUM of $291 billion and an average daily volume of 33 million shares. Invesco QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Invesco NASDAQ 100 ETF (QQQM)

Invesco NASDAQ 100 ETF is identical to QQQ, tracking the NASDAQ-100 Index, but comes with lower annual fees of 15 bps. It holds 103 securities in its basket, with a higher concentration on the top firm. Invesco NASDAQ 100 ETF has accumulated $29 billion in its asset base and trades in an average daily volume of 1.5 million shares. It has a Zacks ETF Rank #2 (read: Buy 5 Growth ETFs as Fed Stays Put, Eyes Rate Cut).

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)

Holding 101 stocks, First Trust NASDAQ-100 Equal Weighted Index Fund provides equal exposure to stocks on the Nasdaq-100 Equal Weighted Index. It has amassed $2.1 billion in its asset base while trading in moderate volumes of 76,000 shares a day, on average. First Trust NASDAQ-100 Equal Weighted Index Fund charges 57 bps in annual fees and carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Invesco NASDAQ Next Gen 100 ETF (QQQJ)

Invesco NASDAQ Next Gen 100 ETF follows the NASDAQ Next Generation 100 Index, which comprises securities of the next generation of Nasdaq-listed non-financial companies, i.e., the largest 100 Nasdaq-listed companies outside of the NASDAQ-100 Index. In total, the product holds 105 securities. Invesco NASDAQ Next Gen 100 ETF charges 15 bps in annual fees and sees a good trading volume of nearly 90,000 shares a day. With an AUM of $655.7 million, QQQJ has a Zacks ETF Rank #3.

Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE)

Direxion NASDAQ-100 Equal Weighted Index Shares provides an equal-weight exposure to the NASDAQ-100 Index by tracking the NASDAQ-100 Equal Weighted TR Index. It has amassed $1.2 billion and trades in an average daily volume of 212,000 shares. Direxion NASDAQ-100 Equal Weighted Index Shares charges 35 bps in annual fees and has a Zacks ETF Rank #3.

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