Third-quarter earnings season is chugging along. Many marquee names hailing from the communication services and tech sectors have already reported. No two earnings reports are alike, but there are some trends emerging. For example, some experts believe a clear pattern is being set of have’s and have not’s when it comes to growth company earnings. Fortunately, for investors engaged with the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), those ETFs are homes to more of tech earnings have’s than laggards.
Another thing experienced market participants know about QQQ and QQQM, which have the same lineups, is these ETFs are among the leading proxies on AI investing. And AI is undoubtedly a segment where investors are increasingly the effectiveness of spending.
“The market is no longer cheering companies that spend endlessly on AI in search of future gains,” said deVere Group CEO Nigel Green. “It’s favouring those proving they can harness AI profitably and efficiently right now.”
QQQ Has the Have’s
Green cites Google parent Alphabet (GOOG), which, across two share classes, accounts for 6.60% of the QQQ/QQQM rosters. That’s a prime example of a tech giant firing on all cylinders while delivering the goods on the AI front.
“Shares hit record highs following the announcement as investors recognised the strength of its monetisation strategy. Google has emerged as one of the few firms turning the cost of AI infrastructure into sustained revenue growth,” according to deVere.
Amazon (AMZN), the largest consumer discretionary holding in the Invesco ETFs, is another example of a familiar growth stock telling a story investors want to hear. With the holiday shopping season here, the consumer side of Amazon is sure to generate plenty of headlines. But investors would do well to focus on opportunities created by the Amazon Web Services (AWS) unit.
“Shares hit record highs following the announcement as investors recognised the strength of its monetisation strategy. Google has emerged as one of the few firms turning the cost of AI infrastructure into sustained revenue growth,” added DeVere.
Bottom Line
As the AI investment thesis matures, market participants will focus more intently on results over hope. Plenty of QQQ/QQQM member firms are delivering on the former, and that’s a good thing.
“The extraordinary enthusiasm around AI is giving way to a more pragmatic approach. Markets want evidence that these investments translate into measurable returns,” concluded Green.
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