Why Did the Invesco QQQ ETF Surge by 54% in 2023? Navigating the Invesco QQQ ETF’s Remarkable 54% Surge

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By Ronald Tech

Shares of the Invesco QQQ Trust (NASDAQ: QQQ) were among the market’s star performers last year. The exchange-traded fund (ETF) tracking the Nasdaq 100 witnessed an astounding surge of 54% in 2023, as reported by S&P Global Market Intelligence.

Several factors catalyzed the robust performance of the tech-heavy ETF. The hype surrounding emerging generative AI technologies, the initially depressed stock prices within the tech sector at the beginning of the year, and the implementation of layoffs and other cost-reduction measures by major tech companies all contributed to bolstering profits over the year.

To witness the ETF’s performance trend throughout the year, refer to the chart below.

^SPX Chart

^SPX data by YCharts

As discernible from the chart, the QQQ’s gains aligned with the S&P 500’s trajectory. However, its acceleration outpaced the latter, reflecting the fervor surrounding AI and the undervaluation of numerous major tech stocks at the year’s commencement.

Unveiling the Tech Stock Boom of 2023

The Invesco QQQ Trust comprises the 100 largest non-financial Nasdaq stocks, with the index being predominantly influenced by the current Magnificent Seven stocks.

All these top stocks delivered substantial gains, mirroring the trends propelling the QQQ to impressive heights.

For instance, Nvidia (NASDAQ: NVDA) witnessed its share value more than tripling as the company emerged as the predominant beneficiary of the surging demand for AI chips, alongside experiencing substantial upticks in revenue and profit margins. The stock of Meta Platforms (NASDAQ: META) also tripled, driven by its successful execution of a “Year of Efficiency,” marked by cost reductions and margin enhancements, in addition to benefiting from the rebound in advertising demand.

Even as profits dwindled in its most recent quarter, Tesla’s (NASDAQ: TSLA) stock doubled in value, propelled by the anticipation surrounding its AI and autonomous vehicle technologies. Meanwhile, prominent tech giants like Microsoft, Apple, Alphabet, and Amazon observed stock price boosts attributed to the concurrent expansion of profit margins, AI advancements, and the prevailing optimism about the economy evading a recession.

A stock chart showing a line moving higher

Image source: Getty Images.

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Foreseeing the Trajectory of the Nasdaq QQQ ETF

The Nasdaq 100 currently commands a price-to-earnings ratio of 29.1, significantly surpassing last year’s 23.5 and even outweighing the S&P 500’s at 21.6. This valuation mirrors the elevated expectations embedded within tech stocks due to the AI momentum. Nevertheless, big tech stocks are anticipated to witness profit upswings this year, with AI momentum continuing to surge as the investments made over the past year begin to yield fruit.

While another 54% gain from the QQQ ETF isn’t to be anticipated, it remains well poised for further ascensions provided the economy evades a recession.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.