It’s official: 2024 is in the books and all eyes are on what this year will bring.
As expected, artificial intelligence (AI) stocks continued to pave the way for market-beating returns last year. While the “Magnificent Seven” held their own, a new player in the AI realm trumped all of megacap tech. Shares of Palantir Technologies(NASDAQ: PLTR) soared by 350% during 2024 — making it the best-performing stock among the S&P 500(SNPINDEX: ^GSPC)index.
While shares of Palantir could very well continue to witness outsized gains this year, I’d caution investors against following too much momentum. Instead, if you’re interested in gaining exposure to the AI industry and want access to leading opportunities fueling the movement, I’d suggest taking a look at the Invesco QQQ Trust(NASDAQ: QQQ).
Below, I’ll break down why this particular exchange-traded fund (ETF) is poised to be a big winner in 2025 and beyond.
Since the Nasdaq was formed in 1971, the index has only posted consecutive negative returns on two occasions. The last time such a trend happened was between 2000 and 2002, when the Nasdaq dropped by 39%, 21%, and 31%.
However, as is always the case with the capital markets, the Nasdaq demonstrated its resiliency following three consecutive years of declines. Starting in 2003, the index went on to post gains for five years in a row — a run that ended in 2008 during the Great Recession.
Considering that stocks are currently riding the wave of a bull market and the empirical trends explored above, it’s more likely than not that the Nasdaq will extend the gains it’s witnessed over the last two years in 2025. As such, investors may want to keep technology stocks on their radar.
Image source: Getty Images.
The chart below illustrates the stock price performance of Invesco QQQ since January 2020. The grey-shaded column represents the brief, albeit important, COVID-19 recession. As the graph shows, the lowest price for Invesco QQQ over the last four years occurred during the COVID-19 pandemic — when shares closed at $169.
However, shares of the ETF rose considerably as pandemic fears waned throughout the latter portion of 2020 and 2021. The next time the fund experienced a pronounced sell-off was during 2022 — a year in which the Nasdaq declined by 33% (its largest decline since 2008). Remember, 2022 was a tough year for the stock market in general as concerns surrounding the macroeconomy mounted over abnormally high levels of inflation.
Even so, Invesco QQQ still traded at materially higher prices when compared to lows seen during the early days of the COVID-19 pandemic. I make this point to underscore the resiliency of the capital markets, and Invesco QQQ in particular.
Admittedly, there are loads of options for technology-focused ETFs. The reason I prefer Invesco QQQ is due to its specific theme, which tracks the Nasdaq-100.
When you invest in Invesco QQQ, you are gaining passive exposure to some of the most influential AI stocks available, including each of the “Magnificent Seven” stocks as well as other compelling names such as Broadcom and Palantir. Furthermore, the fund also provides exposure to growth industries such as cybersecurity and streaming through positions in CrowdStrike and Netflix, and even gives investors some international exposure via e-commerce leaders MercadoLibre and PDD Holdings.
While the Nasdaq-100 is mostly concentrated in technology stocks, there are also some other solid picks in industries such as the consumer discretionary market including Airbnb, Costco, and PepsiCo. Each of these stocks is also held in the Invesco QQQ ETF.
Invesco QQQ provides investors with a diverse group of growth stocks and is composed of a healthy mix of opportunities in AI, consumer, and other market sectors as well. Given that history is on the side of the Nasdaq for 2025 and Invesco QQQ’s positive track record, I think investing in the fund is a no-brainer for investors with a long-run time horizon.
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Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Airbnb, Costco Wholesale, CrowdStrike, MercadoLibre, Netflix, and Palantir Technologies. The Motley Fool has a disclosure policy.
