Top Active Managers Love These ETFs' Holdings

Data indicates top-performing active managers increased their holdings in mega-cap growth stocks like Alphabet, Amazon, Microsoft, and Nvidia during the first quarter, a positive sign for the Invesco QQQ Trust (QQQ) and QQQM ETFs, which allocate approximately 28% of their portfolios to these four companies; this comes as Microsoft's Azure cloud computing unit experiences surging demand and Amazon shows resilience despite trade-related volatility, suggesting a potentially overreacted stock price and continued consumer spending.

Analysis

The Invesco QQQ Trust (QQQ) and Invesco NASDAQ 100 ETF (QQQM) are poised to benefit from renewed interest in mega-cap growth stocks, as evidenced by top-performing active managers increasing their exposure to key holdings during the first-quarter market pullback. Notably, Alphabet (GOOG), Amazon (AMZN), Microsoft (MSFT), and Nvidia (NVDA), which collectively constitute approximately 28% of QQQ/QQQM's portfolios, were among the top-10 first-quarter buys for these managers. This institutional buying aligns with robust fundamental outlooks for these companies. Microsoft, for instance, reported strong demand for its Azure AI services, with Azure growing 35% in constant currency, surpassing internal expectations and guidance. Amazon, despite being down 8.33% year-to-date and facing U.S./China trade volatility, has seen its stock rise over 16% in the past month, partly due to progress on trade fronts and consumer spending habits remaining largely unchanged by tariff concerns. Morningstar notes Amazon's revenue exceeded expectations in most segments, with strong advertising performance, suggesting the stock's prior decline may have been an overreaction and now presents a relative value opportunity among the Magnificent Seven.

Key Decisions for Investors

• Given the buying activity by active managers and strong fundamentals of key constituents like Microsoft and Amazon, investors may consider the recent resurgence in QQQ and QQQM as supported by underlying strength.
• Monitor ongoing developments in AI, particularly Microsoft's Azure capacity and demand, as this is a significant growth driver for a core ETF holding.
• Evaluate Amazon's position, as its recent stock performance and resilient consumer behavior despite trade headwinds suggest potential undervaluation and recovery, which could further bolster QQQ/QQQM performance.
• Consider that the concentrated nature of QQQ/QQQM (28% in four names) means the performance of these specific mega-cap tech stocks will heavily influence the ETFs' returns.