Key Points
After a hot start to the year, tech stocks have been melting in the summer heat. The downturn has been led by top chip stocks, such as Nvidia, Micron Technology, and Advanced Micro Devices, while the stocks of other tech leaders, like Alphabet, Amazon, Microsoft, and Meta Platforms, are all trading well off their highs.
The biggest worry appears to be spending on AI infrastructure, although hyperscalers (owners of large data centers) continue to indicate they are getting strong returns on their investments and will continue to spend heavily on the opportunity. As such, this just looks normal pullback after a big run.
For investors looking to play the dip in tech stocks without picking individual stocks, one of the best ways to do so is to invest in the Invesco QQQ Trust (NASDAQ: QQQ). The exchange-traded fund (ETF) tracks the Nasdaq-100 index, which is heavily weighted toward tech and growth stocks. Both the ETF and index are down about 5% from their highs.
The Invesco QQQ Trust is loaded with top tech stocks. Its top 10 holdings are all leading tech names, and it gives you an instant portfolio of the mega-cap tech stocks that have helped drive the market over the past few years. As of the end of June, its top 10 holdings made up nearly half of its portfolio and included:
Stock
Ticker
Weighting
Stock
Ticker
Weighting
1. Nvidia
NVDA
7.6%
6. Amazon
AMZN
4.2%
2. Apple
AAPL
7.3%
7. AMD
AMD
4%
3. Alphabet
GOOGL/GOOG
6.2%
8. Tesla
TSLA
3.4%
4. Micron
MU
4.9%
9. Meta Platforms
META
2.8%
5. Microsoft
MSFT
4.6%
10. Broadcom
AVGO
2.8%
SpaceX will also soon join the index and likely will slide in as a top-10 holding for the ETF.
A strong-performing ETF
The Invesco QQQ has been a strong-performing ETF over the past decade, and this pullback could be a great time to add some shares. Over the past decade, the ETF has generated a 634.6% return, or 22.1% on an annual average basis. That has easily topped the performance of the S&P 500, which has gained 322.7%, or 15.5% on a yearly basis, over the past 10 years.
QQQ’s outperformance has also been consistent. As of the end of the first quarter, the ETF had beaten the S&P 500 seven of the past 10 years. Meanwhile, it outperformed the market’s barometer index more than 88% of the time on a rolling 12-month basis over the past 10 years. That’s impressive.
That said, when it comes to index ETFs, I always recommend that investors use them as a core holding and consistently dollar-cost average into them over a long time period. This is one of the best investment strategies to build wealth over the long term.
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Geoffrey Seiler has positions in Advanced Micro Devices, Alphabet, Amazon, Broadcom, Invesco QQQ Trust, and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
