Is QQQ Still Worth Buying After the Market's Recent Slide?
Key Points
Tech stocks overall, the "Magnificent Seven" stocks, and the Invesco QQQ ETF are down significantly from their all-time highs.
Current valuations and earnings growth forecasts for the next two years support now being a good buying opportunity.
However, short-term volatility could stick around for a while.
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Investors in the Invesco QQQ ETF (NASDAQ: QQQ) are currently dealing with something they've rarely had to over the past few years: a sharp pullback.
The fund is about 8% off its all-time high as I write this. The last time it fell more than 10% was about a year ago during the "Liberation Day" tariff correction. Before that, you'd have to go back to the third quarter of 2024.
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It hasn't happened often. But the way some economic data is trending, there may not be a quick recovery.
With the 8% loss already in the books, investors need to consider the prospects for this ETF looking forward. The artificial intelligence (AI) narrative will play a big part in evaluating this tech-heavy ETF's outlook. But it's not the only thing.
Image source: Getty Images.
Are valuations really concerning?
We hear a lot about how tech stocks are overvalued and dangerous to buy at current levels, but I'm not sure that's actually the case.
Right now, the S&P 500 Information Technology index is trading at a forward price/earnings (P/E) ratio of 21 compared to the S&P 500's (SNPINDEX: ^GSPC) 20. That's the narrowest gap between these two multiples since late 2018.
In reality, the tech sector really isn't any more expensive than the broader market. Given projected earnings growth rates in 2026 and 2027, tech sector valuations look downright reasonable. QQQ's top holdings are: Nvidia, Apple, Microsoft, Amazon, and Tesla.
Earnings growth still looks strong
The AI boom helped drive strong earnings growth in 2025 for tech stocks, especially the "Magnificent Seven" stocks. But the growth engine isn't expected to cool anytime soon.
FactSet projects 2026 tech sector earnings growth of 36%. For 2027, it's forecasting further growth of 24%. Both numbers are the highest among all 11 S&P 500 sectors.
Some of those expectations are already priced into tech stocks, but I think a good percentage of it still isn't. In short, the fundamental environment for stocks in the Invesco QQQ ETF can continue driving share prices higher.
The wild card: AI spending
The AI revolution has provided a big bullish catalyst for tech stocks. But it could potentially start working in the other direction.
Tech companies have spent and committed hundreds of billions of dollars to AI development. After the initial boom period, investors have begun wondering how much is too much. Initial results have been positive, but the ultimate return on investment from all that spending is still unknown. If companies aren't able to generate the requisite earnings growth from this spending, we could see share prices react negatively.
Is the Invesco QQQ ETF worth buying today?
Given the longer-term outlook for these stocks, I think this looks like a prime buy-the-dip opportunity. Short-term volatility could still whipsaw stock prices around, but if you're willing to buy and hold for more than the short term, you could look back at right now as a good entry point.
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David Dierking has positions in Apple. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, Nvidia, and Tesla and is short shares of Apple. The Motley Fool has a disclosure policy.
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