Billionaires Invest in the Invesco QQQ Trust Focused on AI Stocks

The S&P 500 (SNPINDEX: ^GSPC) has seen a remarkable rise of 27% this year, driven largely by excitement surrounding artificial intelligence. A group of stocks known as the "Magnificent Seven" has played a significant role in this surge, contributing to more than half of the index's gains. This group includes major companies such as Nvidia, Tesla, and others. Notable hedge fund billionaires have been actively buying shares of the Invesco QQQ Trust (QQQ -0.65%), an index fund that offers substantial exposure to these influential stocks.

• Paul Tudor Jones from Tudor Investment acquired 98,531 shares of the Invesco QQQ Trust, adding a new position that ranks among his top 20 holdings, excluding options contracts.
• Cliff Asness of AQR Capital Management boosted his investment by purchasing 26,970 shares of the Trust, effectively tripling his existing stake.
• Israel Englander of Millennium Management also made significant moves, buying 198,064 shares, which more than tripled his position in the fund.

When considering investments, it is crucial for investors to develop their own strategies rather than simply following the footsteps of others in the market. To understand more about the Invesco QQQ Trust, continue reading below.

Exploring the Invesco QQQ Trust and Its Focus on AI Stocks

The Invesco QQQ Trust tracks the performance of the Nasdaq-100 index, which includes the 100 largest non-financial companies listed on the Nasdaq Stock Exchange. This fund has a strong emphasis on the information technology sector, with the Magnificent Seven stocks accounting for approximately 45% of its total value.

Here are the ten largest holdings in the Invesco QQQ Trust, listed by their weight in the fund:

1. Apple: 8.9%
2. Nvidia: 7.8%
3. Microsoft: 7.8%
4. Amazon: 5.6%
5. Meta Platforms: 5.1%
6. Alphabet: 5.1%
7. Broadcom: 4.9%
8. Tesla: 4.6%
9. Costco Wholesale: 2.7%
10. Netflix: 2.4%

The companies referred to as the Magnificent Seven are some of the most profitable globally. Recently, these companies reported an impressive net profit margin of 23.5%, while the remaining 493 companies in the S&P 500 posted a much lower margin of 9.2%.

Looking ahead, the Magnificent Seven are projected to achieve earnings growth of 36% this year, followed by 21% next year. In contrast, the earnings growth for the other 493 companies in the S&P 500 is expected to be only 3% this year, and 13% the following year. While the valuations for the Magnificent Seven may seem high, their growth rates significantly outpace those of most average companies in the S&P 500.

The Invesco QQQ Trust not only provides exposure to these leading companies but also taps into transformative technologies expected to generate substantial wealth for investors. These technologies include artificial intelligence, cloud computing, autonomous vehicles, and quantum computing.

Performance of the Invesco QQQ Trust Over Time

While the S&P 500 is often considered the primary benchmark for the U.S. stock market due to its diversity and breadth, the Invesco QQQ Trust has consistently outperformed this benchmark over various timelines, including the past year, three years, and five years. More notably, over the last decade, the Trust's returns have doubled those of the S&P 500, and tripled over the past twenty years.

Time Period	Invesco QQQ Trust Return	S&P 500 Return
1 Year	35%	32%
3 Years	33%	29%
5 Years	160%	94%
10 Years	412%	200%
20 Years	1,230%	412%

Data is sourced from YCharts and reflects current information as of December 11, 2024.

One important aspect to consider is the potential for volatility within the Invesco QQQ Trust. Its three-year beta is measured at 1.18, indicating that for every 100-basis-point move in the S&P 500, the Trust tends to move by 118 basis points (1.18 percent). This means that while the fund may perform stronger on positive days, it can also experience sharper declines on negative ones.

Moreover, during a market downturn, the Invesco QQQ Trust is expected to drop more severely than the S&P 500. For instance, in the bear market that began in January 2022, the S&P 500 fell by 25%, while the Invesco QQQ Trust saw a decline of 36%.

Investors should also note the fund's expense ratio of 0.2%, meaning a cost of $20 for every $10,000 invested. This fee is below the industry average of 0.36%, as reported by Morningstar.

In conclusion, while past performance does not guarantee future results, the Invesco QQQ Trust has shown itself to be an excellent long-term investment option. It has consistently outdone the S&P 500, and with the rise of technologies such as artificial intelligence and robotics, more outperformance is expected over the next decade.

billionaires, invest, stocks