Nasdaq Turns Positive in 2025: ETFs to Ride the Rally

The tech-heavy Nasdaq Composite Index turned positive for the first time since Feb. 21 after an impressive rally in May. Robust earnings, renewed artificial intelligence (AI) optimism and easing trade tensions drove the index higher. The gains were also supported by a growing investor confidence that President Trump’s trade policies may not push the economy into a recession, as had been feared just a few weeks ago (read: S&P 500 Wraps Up Best May Since 1990: 5 Top Stocks in the ETF).

As such, the ETFs tracking the index have gained momentum. These include Invesco QQQ QQQ, Invesco NASDAQ 100 ETF QQQM, First Trust NASDAQ-100 Equal Weighted Index Fund QQEW, Invesco NASDAQ Next Gen 100 ETF QQQJ and Direxion NASDAQ-100 Equal Weighted Index Shares QQQE.

Easing Trade Tensions

Optimism surrounding President Trump's trade policies, including temporary tariff reductions in the case of the United Kingdom and China, has alleviated fears of recession. After the initial shock of the tariffs, the United States temporarily slashed tariffs on Chinese goods from 145% to 30%. China also lowered its retaliatory duties on U.S. goods from 125% to 10%. The temporary reduction in rates will run for 90 days. Meanwhile, Trump also postponed the implementation of a 50% tariff increase on all EU products, from June 1 to July 9. 

However, clear progress in trade negotiations with China, Japan and the European Union remains elusive.

NVIDIA Boost

The technology sector, particularly semiconductor companies, has been a primary driver of the Nasdaq's rebound. Chipmakers like NVIDIA (NVDA) and Broadcom AVGO underscore the sector's strength (read: 5 Technology Stocks Powering S&P 500 ETF). 

NVDA reclaimed the crown as the world’s most valuable company, boasting a market capitalization of $3.45 trillion. Since bottoming at just over $94 in early April, the stock has soared nearly 50%, adding over $1 trillion in market cap in less than two months. This rally indicates renewed investor confidence. Meanwhile, Broadcom surged to near record highs ahead of its quarterly results, driven by its burgeoning AI product line and the strategic acquisition of VMware in 2023.

Strong Tech Earnings

Total first-quarter earnings for the 477 S&P 500 members that have reported results are up 11.4% from the same period last year on 4.4% higher revenues, with 74.2% beating EPS estimates and 62.9% beating revenue estimates, per Zacks Earnings Trends.

While many companies struggled to beat consensus estimates, the technology sector stood out with stronger-than-anticipated performance. Earnings growth in tech remained consistent with recent trends, and notably, the percentage of tech firms beating revenue estimates exceeded the five-year average.

ETFs in Focus

Invesco QQQ (QQQ) 

Invesco QQQ provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. It is one of the largest and most popular ETFs in the large-cap space, with an AUM of $333.9 billion and an average daily volume of 47 million shares. Invesco QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Big ETF Inflows of Last Week: QQQ, IBIT & More). 

Invesco NASDAQ 100 ETF (QQQM)

Invesco NASDAQ 100 ETF is identical to QQQ, tracking the NASDAQ-100 Index, but comes with lower annual fees of 15 bps. It holds 105 securities in its basket, with a higher concentration on the top three firms. Invesco NASDAQ 100 ETF has accumulated $48.4 billion in its asset base and trades in an average daily volume of 3 million shares. It has a Zacks ETF Rank #3.

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) 
 
Holding 101 stocks, First Trust NASDAQ-100 Equal Weighted Index Fund provides equal exposure to stocks on the Nasdaq-100 Equal Weighted Index. It has amassed $1.8 billion in its asset base while trading in moderate volumes of 78,000 shares a day, on average. First Trust NASDAQ-100 Equal Weighted Index Fund charges 55 bps in annual fees and carries a Zacks ETF Rank #3 with a Medium risk outlook.

Invesco NASDAQ Next Gen 100 ETF (QQQJ)

Invesco NASDAQ Next Gen 100 ETF follows the NASDAQ Next Generation 100 Index, which comprises securities of the next generation of Nasdaq-listed non-financial companies, i.e., the largest 100 Nasdaq-listed companies outside of the NASDAQ-100 Index. In total, the product holds 109 securities. Invesco NASDAQ Next Gen 100 ETF charges 15 bps in annual fees and sees a good trading volume of nearly 80,000 shares a day. With an AUM of $605 million, QQQJ has a Zacks ETF Rank #3.

Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE)

Direxion NASDAQ-100 Equal Weighted Index Shares provides an equal-weight exposure to the NASDAQ-100 Index by tracking the NASDAQ-100 Equal Weighted TR Index. It has amassed $1.1 billion and trades in an average daily volume of 178,000 shares. Direxion NASDAQ-100 Equal Weighted Index Shares charges 35 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

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This article originally published on Zacks Investment Research (zacks.com).

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