The Nasdaq-100 index features 100 of the largest nonfinancial companies listed on the Nasdaq stock exchange. It's home to many of the trillion-dollar tech giants that lead the artificial intelligence (AI) industry, so it has delivered spectacular returns over the last couple of years.
However, it's currently in the throes of a correction after declining by as much as 13% from its recent all-time high.
Investors have taken some money off the table because a combination of elevated valuations and uncertainty surrounding tariffs and global trade have dampened sentiment. However, the Nasdaq-100 has climbed to new record highs after every correction since it was established in 1985, so this is likely to be a great buying opportunity in the long run.
The Invesco QQQ Trust(NASDAQ: QQQ) is an exchange-traded fund (ETF) that tracks the performance of the Nasdaq-100 by holding the same stocks and maintaining similar weightings. Here's why investors might want to buy it now.
Image source: Getty Images.
Exposure to a diverse portfolio of AI powerhouses
The Nasdaq-100 is weighted by market capitalization, meaning its largest constituents have a greater influence over its performance than the smallest. Therefore, it's no surprise that Apple, Microsoft, and Nvidia are the top three holdings in the Invesco QQQ ETF -- they are the world's largest companies, with a combined market cap of $9 trillion.
Those five companies have become leaders in different segments of the AI industry, as have Amazon and Broadcom, which round out the ETF's top five positions. However, the ETF is filled with dozens of other AI powerhouses that sometimes receive less attention from investors, including:
Stock
Invesco ETF Portfolio Weighting
Netflix
2.78%
Cisco Systems
1.65%
Intuitive Surgical
1.22%
Advanced Micro Devices
1.20%
Palo Alto Networks
0.82%
Data source: Invesco. Portfolio weightings are accurate as of Feb. 28, 2025, and are subject to change.
Netflix operates the world's largest streaming platform, with 301.6 million subscribers. AI is playing a growing role in its success by providing highly accurate content recommendations, and it even analyzes the strength of users' internet connection to deliver a consistent stream without pauses or interruptions.
These features keep users watching for longer periods of time and makes them stickier. Netflix has become a cash-generating machine, delivering a record $8.7 billion in profit on $39 billion in revenue last year.
Cisco supplies networking and connectivity solutions to enterprises and consumers, but the company is rapidly pivoting toward AI on several fronts. Nvidia recently announced it will use Cisco's Hypershield and AI Defense products to secure its AI factories (data centers). Plus, Cisco's workplace collaboration platform, Webex, recently introduced AI agents to help enterprises resolve more customer queries without human intervention.
Then there is Intuitive Surgical, which develops robotics for the healthcare industry. Its Da Vinci robot, for example, can help doctors complete major surgeries with keyhole incisions, resulting in less pain and faster recovery times.
The latest Da Vinci 5 system contains 10,000 times more computing power than its predecessor, so it can leverage AI more effectively to improve the accuracy of the robot's arm and enhance the images the doctors see during procedures.
Advanced Micro Devices (AMD) supplies graphics processing units (GPUs) for data centers that are designed for AI workloads, and they have become a genuine competitive threat to some of Nvidia's industry-leading chips. However, AMD is also one of the top suppliers of AI processors for personal computers and devices, which could be a major growth area in the future.
Lastly, Palo Alto Networks is the world's largest cybersecurity vendor, and it's weaving AI into a growing number of products. Cortex XSIAM, one of its newest platforms, enables organizations to automate their security operations by using AI to detect threats and respond to incidents.
One customer in the healthcare industry says it now resolves 90% of security alerts with automation, up from just 10% prior to adopting XSIAM. Humans simply can't keep up with the volume of cyber risks threatening organizations, so demand is soaring for AI-powered solutions.
But it doesn't end there. The Invesco ETF also holds several other popular AI stocks like Tesla, Palantir Technologies, Micron Technology, and more.
Image source: Getty Images.
Now could be a great time to buy the Invesco QQQ ETF
According to investment manager Capital Group, stock market corrections of 10% or more occur once every two and a half years on average, so they are quite common. Sometimes they are triggered by economic shocks like the pandemic or the global financial crisis, but they can also happen during periods of general uncertainty, which appears to be the case right now.
Since President Trump took office on Jan. 20, he has placed tariffs on a variety of foreign products coming into the U.S. to encourage companies to move their manufacturing onshore. Just last week, he imposed a blanket 25% tariff on all cars coming in from overseas. That basically means that if you buy a vehicle that's manufactured in whole or in part outside the U.S., you could pay significantly more.
Most of the countries subjected to Trump's tariffs typically impose tariffs of their own, which affect U.S. goods entering their own borders. Trade wars of this kind can hurt the global economy because consumers can't absorb the sudden price shocks, so spending declines.
This is part of the reason the Nasdaq-100 suffered a peak-to-trough correction of 23% during 2018, when Trump made a series of similar moves during his first term in office.
But here's the good news: The stock market recovered to new highs in 2019, and this time probably won't be different. The Nasdaq-100 (and by extension, the Invesco ETF) is filled with some of the highest quality companies in the world, and many of them will continue riding the AI wave that PwC estimates could add $15.7 trillion to the global economy by 2030. Therefore, buying the Invesco QQQ ETF during the latest Nasdaq-100 correction is likely to be a wise move for the long term.
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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 the following options: long April 2025 $200 puts on Tesla and long April 2025 $210 puts on Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple, Cisco Systems, Intuitive Surgical, Microsoft, Netflix, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Broadcom, Nasdaq, and Palo Alto Networks 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.
