Should You Buy the Invesco QQQ ETF During the Nasdaq Bear Market? Here's What History Says

The Nasdaq-100 is home to 100 of the largest nonfinancial companies listed on the Nasdaq stock exchange, including each of the "Magnificent Seven," which have a combined value of $15 trillion. In other words, it's a great proxy for the performance of the technology and technology-adjacent industries.

The Nasdaq-100 was down by as much as 23% from its record high in April, placing the index in a technical bear market. Investors have flocked to the safety of cash amid growing economic and political uncertainty, triggered by the tariffs President Donald Trump recently enacted on imported products from America's trading partners. However, if history is any guide, this might actually be a great time to buy the index.

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The Invesco QQQ Trust (NASDAQ: QQQ) is an exchange-traded fund (ETF) that tracks the performance of the Nasdaq-100 by maintaining an identical portfolio of stocks, so it offers investors a simple way to own the entire index.

Image source: Getty Images.

The Magnificent Seven could lead the Nasdaq out of its slump

The Magnificent Seven is a group of seven of the largest stocks in the U.S. Wall Street analysts gave them the nickname in 2023 not just for their size, but also because they have consistently led the broader market higher over the last few years. They represent a whopping 41.3% of the total value of the Invesco QQQ Trust (and the Nasdaq-100), so they have a massive influence over its performance:

Data source: Invesco. Portfolio weightings are accurate as of April 25, 2025, and are subject to change.

The Magnificent Seven stocks are down by an average of 15% this year amid the broader market sell-off, led by Tesla, which has declined 29% on the back of soft demand for the company's electric vehicles. But the downside for the rest of this group might be short-lived given their earnings power. Alphabet, for example, just delivered a much stronger set of financial results than Wall Street expected in the first quarter of 2025, with its net income (profit) rocketing higher by 46% year over year.

Looking beyond the recent quarter, artificial intelligence (AI) could be a long-term tailwind for Alphabet, Amazon, and Microsoft because of their growing portfolio of AI services that they sell via their cloud platforms. They offer industry-leading data center infrastructure and a selection of ready-made large language models (LLMs), which are two of the main ingredients developers need to create AI software.

In fact, each of them is experiencing more demand for computing capacity than they can supply, which is a big tailwind for another member of the Magnificent Seven: Nvidia. The company makes the world's most advanced chips for processing AI workloads, and its data center revenue surged by 142% to $115.2 billion during its fiscal year 2025 (ended Jan. 26). The result contributed to a record $2.99 in earnings per share, and following the recent dip in its stock, Nvidia is now trading at a bargain valuation relative to its 10-year average.

But the Invesco QQQ Trust isn't entirely about the Magnificent Seven. In its list of top-20 holdings, investors will also find streaming giant Netflix, retail powerhouse Costco Wholesale, telecommunications provider T-Mobile, and AI software dynamo Palantir Technologies.

Why now might be a great time to buy this Invesco ETF

This Invesco ETF has weathered no less than five other bear markets since it was established in 1999, and each of them was triggered by a unique economic shock:

• 2000: The dotcom internet bubble burst, triggering a recession in the U.S. and a three-year slump in the Nasdaq-100.
• 2008: The housing bubble burst, which culminated in the Global Financial Crisis.
• 2018: President Trump enacted a series of tariffs during his first term in office, which sparked fears of a global trade war.
• 2020: The COVID-19 pandemic almost brought the global economy to its knees.
• 2022: Inflation spiked to a 40-year high, which drove a rapid increase in interest rates and a sell-off in higher-risk assets like stocks.

But even after accounting for all of those bear markets -- and every smaller sell-off in between -- this Invesco ETF still delivered a compound annual return of 10% between 1999 and 2024.

The current bear market is unlikely to derail that long-term trend. President Trump has already pared back some of the tariffs he announced on "Liberation Day" on April 2, and his administration says dozens of countries have come to the table to negotiate new trade deals. A similar sequence of events followed Trump's first round of tariffs in 2018, and it paved the way for a whopping 38% gain in the Nasdaq-100 the very next year.

Plus, the tariffs only impact physical imports, which means software, cloud services, and other digital goods aren't facing any penalties (yet). That's great news for companies like Alphabet, Microsoft, and Amazon. Moreover, semiconductors are exempt from the more aggressive portion of Trump's tariffs because the president wants the U.S. to remain a leader in the AI race. That benefits Nvidia, in addition to Broadcom, Advanced Micro Devices, and Micron Technology, which are also in the Nasdaq-100.

As a result, patient investors might want to use the current bear market in the Nasdaq-100 as an opportunity to take a long-term position in the Invesco QQQ Trust.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Netflix, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Broadcom, Nasdaq, and T-Mobile US 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.