Over the past year, investors have become accustomed to staring at a certain type of chart, and QQQM’s is one of them. The queue lengthens. Every now and then, usually for a short while, it descends before rising once more. The fund drifted in the $176 range exactly twelve months prior to closing at $267.13 on April 17, a new 52-week high. That’s a 46 percent change in just a single year, the kind of return that was once extraordinary but now seems almost commonplace.
QQQM is frequently referred to as QQQ’s quieter sibling. The index, holdings, and price per share are all the same, but the expense ratio is marginally lower at 0.15 percent. It was introduced by Invesco in October 2020 with the intention of attracting long-term investors who desired less expensive exposure to the NASDAQ-100 without the tighter spreads that attract day traders to QQQ. It was successful. Depending on the page you’re looking at on any given day, the fund’s assets have quietly increased to between $68 and $79 billion. This serves as a reminder that even “quiet” products in this market are huge.
This is where things become a little awkward: what’s inside matters. Nearly 47% of the fund is made up of the top ten holdings. By itself, NVIDIA is at about 8.66 percent. The remaining companies are Apple, Microsoft, Amazon, Tesla, Meta, both classes of Alphabet, Broadcom, and Walmart. Over half of the fund’s weight is made up of technology, with an additional 16% coming from communication services. Purchasing QQQM is more akin to placing a concentrated wager on seven or eight companies that are coincidentally dragging along a hundred others than it is to purchasing “the NASDAQ”.
That’s not always a bad thing. It’s just worth saying aloud. This product is structurally integrated with the AI trade, which has been the primary driver of the last two years. Because of NVIDIA alone, QQQM is affected by Jensen Huang’s keynote address in a crowded San Jose auditorium by lunchtime. This concentration, which is typically the more hazardous condition, seems to have been accepted by investors, or perhaps they have stopped noticing it.
As this develops, it’s difficult to ignore how consistent this fund’s daily gain of 1.3 percent has become. That kind of gain in a broad ETF used to be noteworthy. It’s Friday now. The dividends are modest but genuine, the tax efficiency is strong, and the volatility is less than that of QQQ’s previous drama. QQQM has practically become the default “growth” holding for many retail investors, the kind who open Robinhood on their phone in between meetings.
Something still bothers me. The trailing P/E of the fund is higher than 34. The 46% one-year return is not realistically repeatable. And if AI spending falls short or the Fed surprises, the same focus that has fueled the rise could quickly reverse. There are many examples in history. NASDAQ in 2000. The decline in 2022. On the way in, neither felt particularly noticeable. The price of QQQM does not include disappointment. Investors will eventually have to respond to the question of whether it is necessary.