Is QQQ Still Worth Buying After the Market's Recent Surge?

The tech-stock-heavy Nasdaq-100 has been on an absolute tear since April 1.

No joke, since April Fool's Day, the Nasdaq-100 has climbed 33%, erasing a first-quarter correction. As of June 1, the Nasdaq-100 is up 20.1% year to date and is sitting near an all-time high of 33,578.

The best way to tap into the growth of the Nasdaq-100 is the Invesco QQQ (NASDAQ: QQQ), an exchange-traded fund (ETF) that tracks the index. It is one of the largest ETFs in the world, with some $494 billion in assets, and has been a stellar performer over its 27-year run.

The QQQ has wiped out its early losses with its springtime rally and is now up 20% year to date as of June 1.

Image source: Getty Images.

Over the years, the QQQ has been a great investment. It has generated an average annualized return of 17% over the past five years, rising to 21% over the past 10 years. Over the past 20 years, the QQQ has averaged a 16% annual return.

Since its inception in March 1999, through the dot-com boom and bust, the Great Recession, the COVID-19 crash, and every other peak and trough, it has averaged an 11% annualized return as of June 1.

However, while the Invesco QQQ remains a great long-term investment, there are some red flags to heed.

All-time highs for the Nasdaq-100

Amid this huge rally in the Nasdaq-100 and QQQ, the index's valuation has spiked, with the P/E ratio surging to around 37, the highest since late 2024. The only other time in recent years when the P/E ratio was this high was late 2020/early 2021, during the post-COVID tech stock boom.

The two scenarios provide a somewhat contrasting view.

When the Nasdaq-100 P/E ratio reached 38 in mid-December 2024, the index was trading at around 22,000. That was pretty much its peak, as it proceeded to drop some 23% to around 17,000 in early April 2025.

During the 2020-2021 period, the P/E ratio of the Nasdaq-100 peaked at 38 between late December and early February. At the time, the Nasdaq-100 was at about 13,800. But while the index kept churning higher to more than 16,500 in November 2021, the P/E fell to around 32 -- which is within a more normal range for the index.

So, when you look at the high P/E ratio of the Nasdaq-100 now, it's not clear whether it's hit a peak and will correct, or if it still has some more room to run.

This analysis of recent trends really shows that every market is different. In 2026, the artificial intelligence boom has led to surging corporate earnings growth that has sustained the high prices, so the valuations appear more based on robust earnings projections than speculation, like past bubbles.

It is not too late to buy the QQQ right now -- because it has proven to be a great long-term investment that has navigated the peaks and troughs and outperformed most other ETFs. But investors should keep an eye on its valuation.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.