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New ETF Could Be Ideal AI Play in 2025

BY | ETF Database
01/21/2025 | 1140 VIEWS
The artificial intelligence (AI) evolution is expected to continue in earnest this year. Adopters are forecasting they’ll spend massive sums of capital to bolster their AI capabilities. As was seen last year, AI advancements and an increased adoption trajectory have important investment implications. And they explain why megacap growth stocks led the broader market higher.Obviously, it’s early in 2025 and it remains to be seen if last year’s market leaders can repeat the feat again this year. But for investors willing to make that bet, the Invesco Top QQQ ETF (QBIG) could be an ETF to consider. The fund debuted last month, adding to Invesco’s heralded lineup of ETFs with ties to the Nasdaq-100 Index (NDX). On that note, prospective investors should realize QBIG is an actively managed ETF that attempts to generate returns on par with the Nasdaq-100 Mega Index. That index comprises the top 45% of NDX member firms.QBIG DNA MattersA simple way of looking at QBIG is that it’s a Magnificent Seven ETF plus one. That means it holds each of the Magnificent Seven stocks plus semiconductor behemoth Broadcom (AVGO). Broadcom is a rising force in the AI infrastructure space. The ETF’s composition is important. That’s because it implies investors can access a high-quality AI play with the possibility of less volatility than what comes along more speculative small-caps tied to AI. Additionally, some market observers believe last year’s AI leaders, including QBIG holdings, could extend their dominance this year. “So, if we look back in the second half of last year, 2024, stocks where our analysts previously increased both AI exposure and materiality in our last survey went on to outperform broader equity markets by over 20 per cent in the second half of 2024,” noted Ed Stanley, Morgan Stanley’s global head of thematic research. “If we apply the same logic looking forward, where do we think most outperformance is going to come from? It’s in those same stocks where our analysts have just upgraded the exposure and materiality to the investment case.”Other Traits That May Bode Well for QBIGStanley highlights some other traits that could bode well for QBIG going forward. Those include software companies taking on larger AI leadership roles and adopters leveraging pricing power to improve their AI exposure. Should those scenarios come to pass, QBIG’s six holdings that aren’t Broadcom and Nvidia could power the ETF. “These are companies that adopt AI early and use it to expand their margins but sustainably, without having to give it back to their customers. And the third is Financial stocks, in particular, where AI Rate of Change has been the fastest of any sector in our global coverage – in terms of the efficiency gains that we think it can manifest for the share prices,” he added. For more news, information, and analysis, visit the ETF Education Channel.

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