Is It a Good Idea to Purchase the Invesco QQQ ETF Now That the Nasdaq Is Close to an All-Time High? History Provides a Clear Response.

The Nasdaq is often the go-to place for newer companies looking to go public due to its lower listing fees and more lenient rules compared to exchanges like the New York Stock Exchange. This is why tech powerhouses like Amazon and Nvidia opted to list on the Nasdaq when they started gaining traction in the late 1990s.

Since then, both Amazon and Nvidia have become trillion-dollar giants, riding the wave of rapid trends in cloud computing, e-commerce, and artificial intelligence (AI). Their massive scale means they have a significant impact on the Nasdaq-100, which tracks the 100 largest non-financial firms on the Nasdaq and often serves as a bellwether for the tech sector’s performance.

The Nasdaq 100 saw a drop of 7% in November but has nearly bounced back. In fact, a rise of just under 2% from its current levels would set a new all-time high for the index. The Invesco QQQ Trust is an exchange-traded fund (ETF) that mirrors the Nasdaq 100 by holding the same stocks and similar weightings, so one might wonder if now is the right time to invest. History has some insights on this.

Featuring Leaders in AI, Autonomous Driving, and Robotics

The Invesco QQQ ETF is made up of 100 different companies, but its top 10 holdings account for an impressive 55.3% of its overall portfolio. This indicates not just a heavy concentration in tech fields, but also that a few companies wield substantial influence over its performance.

Nvidia and Broadcom are key players in providing chips and components crucial for AI advancements. Nvidia is also working on software and hardware for self-driving cars and robots, which could drive its growth further if the AI infrastructure pace slows down.

Companies like Microsoft, Alphabet, and Amazon develop their own AI assistants, but they also run the largest cloud platforms in the world, offering services to aid businesses in AI development. These services provide access to cutting-edge data centers and large-scale language models (LLMs) that facilitate development.

On another note, Tesla is a leading electric vehicle (EV) manufacturer, yet investors are increasingly focused on its innovative products, such as self-driving taxis and humanoid robots. The CyberCab is expected to enter production in 2026, while Optimus could follow shortly thereafter. Both may be significantly more valuable than Tesla’s current EV business.

However, the Invesco QQQ ETF also includes companies outside of pure tech, like streaming service Netflix and e-commerce titan Shopify, as well as food delivery giant DoorDash and business software company Intuit. There are also holdings in staple companies like Costco, PepsiCo, and Starbucks.

Historical Perspective on Investing

Since its launch in 1999, the Invesco QQQ ETF has delivered an average annual return of 10.5%, even after navigating through market disruptions like the dot-com bubble, the global financial crisis, and the COVID-19 pandemic.

While past performance is not always a predictor of future results, the Nasdaq 100 Index generally trends upward over time. This implies that investing in the Invesco QQQ ETF rarely comes with a poor timing risk, assuming one is willing to hold for at least five years—longer is even better. Investing here means going along for the ride with some of the most transformative innovations of our era.

This chart highlights the returns of the top five stocks in the Invesco ETF over the last decade. The evidence seems to favor a bullish and optimistic outlook.

Even as AI has driven impressive returns lately, technologies like self-driving vehicles, robotics, and possibly quantum computing are likely to take the lead in the coming decade. In simpler terms, technology is always evolving, so potential investors shouldn’t shy away from purchasing the Invesco QQQ ETF just because the Nasdaq 100 is near all-time highs.