Is the QQQ ETF the Smartest Investment You Can Make Today?

While everyone has their own investing style, my preferred method of investing is primarily exchange-traded funds, coupled with a handful of individual stocks. ETFs provide a world of investment opportunities, as there are several thousand funds from which to choose. And they come in every size and flavor imaginable, so you can decide to follow a major index or zero in on a specific sector or theme.

My favorite in this space is a fund full of large-cap tech stocks that are major players in developing artificial intelligence (AI) platforms and infrastructure. They are deeply involved in advancing data analytics, automation, cloud computing, machine learning, and generative AI -- functions that are used in every industry to power the global economy.

And because the fund has 100 stocks, investors get instant diversification. Whichever companies come out on top in the AI race, there are companies in this fund that will play key roles. Let's take a closer look at this fund -- the Invesco QQQ Trust (NASDAQ: QQQ).

Image source: Getty Images.

About the QQQ ETF

The Invesco QQQ Trust tracks the Nasdaq-100 index, which includes the 100 largest non-financial stocks in the Nasdaq. The fund, which began in March 1999, has an expense ratio of 0.20% or $20 annually per $10,000 invested.

I like the QQQ because of the heavy exposure to technology stocks, which comprise 64% of the fund. Consumer discretionary companies make up 18.3% of the QQQ, with no other sector holding more than 4%. That's helped the QQQ consistently outperform the Nasdaq Composite, particularly over the long term.

Data source: YCharts.

And that difference is real money over time. For instance, a $10,000 investment in the QQQ 20 years ago would be worth $106,600 today, while that same investment in the Nasdaq Composite would only generate $89,000 in the same period.

What stocks are in the QQQ?

Let's look specifically at the top 10 holdings, as they make up 53% of the fund.

Data source: Invesco, YCharts.

As the chart shows, the QQQ is a who's who of top tech stocks. All of them, except Netflix, design and develop AI chips, and Netflix has what's arguably the leading streaming video site that relies on AI to improve streaming quality, recommend titles, and even personalize the thumbnails of suggested content to attract users.

You've also got the leading cloud computing providers (Amazon Web Services, Microsoft Azure, and Google Cloud), huge advertisers, and industry leaders in smartphones, autonomous driving, and robotics. All are gigantic industries that are developing the new infrastructure of the economy. And QQQ gives you access to them all.

The positives outweigh the risks

Of course, with any investment, you're going to have some risk. Tech stocks have been falling in recent weeks due to legitimate concerns that we're approaching -- or perhaps already in -- an AI bubble that could pop similarly to the dot-com bubble or the housing bubble. Tech companies are putting hundreds of billions of dollars into AI infrastructure, but some of these deals are seen as circular -- such as Nvidia and Microsoft's $15 billion investment in Anthropic, which will, in turn, spend billions on Nvidia chips and Microsoft cloud computing capacity.

And I agree that not every AI company will be a winner. There are hundreds of AI start-ups, but it's impossible to predict how many of them will be successful -- or even exist five years from now. Remember how many companies faded away in the dot-com bubble?

However, the companies in the QQQ are already established, with substantial resources, and are already profitable. The companies that make up the top holdings in the fund have a median market capitalization of $2.44 trillion. They generate billions of dollars in revenue and profits every quarter. They aren't going anywhere.

In my book, investing in the QQQ provides above-average returns, exposure to the best tech stocks that are doing groundbreaking AI work, and protection from companies haven't begun to scale and turn a profit. That's why I'm keeping my money in QQQ, and not losing sleep about the so-called AI bubble.

Patrick Sanders has positions in Invesco QQQ Trust and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.