Invesco QQQ monthly review

Overview

• For the month of October, QQQ saw an NAV total return of 4.79% and outperformed the S&P 500 Index which returned 2.34%. The Russell 1000 Growth Index returned 3.63% and the Russell 1000 Value Index returned 0.44%, both also underperforming QQQ.¹
• QQQ’s relative outperformance vs. the S&P 500 Index was driven by its overweight exposure and differentiated holdings within the Technology sector and lack of exposure in the Financials sector.
• QQQ saw inflow of ~$6.929 billion.
• QQQ ended the month with $410.88 billion in AUM and remained the 5th largest ETF in the US (based on AUM).
• For the month of October, shares traded of QQQ increased by 6.8% month-over-month and notional value traded increased by 10.8% month-over-month.²

Market Recap

QQQ extended its monthly positive performance streak to seven months after it advanced by 4.79% on an NAV total return basis for October, outperforming the S&P 500 which returned 2.34%. U.S. equity markets performance was led by large caps with both the Nasdaq-100® and S&P 500 setting new all-time high closing levels on October 29th and 28th, before pulling back modestly into month end. Small caps, measured by the Russell 2000, were up 1.81%, while mid caps, measured by the S&P MidCap 400, lagged, falling -0.47%. Growth outpaced value in October, as the Russell 1000 Growth posted strong returns advancing 3.63%, while the Russell 1000 Value increased modestly advancing 0.44%.³ Large cap growth and technology names demonstrated leadership while market breadth narrowed.

Equity markets were propelled primarily by stronger than expected corporate earnings results, the Federal Reserve Open Market Committee’s (FOMC) decision to cut interest rates by another 0.25%, moderating inflation, and generally continued enthusiasm regarding artificial intelligence (AI).⁴ Despite strong headline returns, volatility, as measured by the VIX index, increased in October closing the month ~7% higher.⁵ Flaring trade tensions between the U.S. and China, the U.S. Government and some angst related to elevated valuations in AI names all contributed to the uptick in volatility.

On October 1st, the U.S. Government shutdown when the previous continuing resolution expired and congress failed to pass full year appropriations for Fiscal Year 2026. The Senate rejected the House’s clean continuing resolution a total of 13 times throughout the month. The government shutdown resulted in the furlough of 750k federal government employees. A key point of conflict between Senate Republicans and Democrats centered around expiration of Affordable Care Act premium subsidies set to expire at the end of the year. 

With limited macro-economic releases occurring due to the government shutdown there seemed to be an increased focus on the Challenger Jobs report, a monthly report that is used as an indicator of labor market strength. The Challenger data, released on October 2nd, demonstrated mixed results. The data indicated that US employers announced plans to add 117k jobs in September, notably lower than a year earlier and marking the weakest September print since 2011. However, the data also indicated that companies announced plans to cut 54k jobs, notably lower than a year earlier and the August release. The report indicated a labor market in which there is both limited hiring and firing.

Equity markets turned their focus back to trends in AI. Hyperscalers continued to accelerate capital expenditures plans dedicated towards AI infrastructure build out, which has continued to fuel investor optimism around the rapidly emerging technology. Earnings reports from major players in the space were also generally positive. However, markets have also demonstrated a degree of trepidation regarding lofty growth expectations and the elevated valuations. On October 6th, reports surfaced that Oracle’s profit margins on rentals of servers powered by Nvidia chips for the three-month period ending in August, were notability lower than what many analysts had been estimating. Despite revenue of ~$900 million, Oracle reported gross profits of ~$125 million. Lower than anticipated margins stoked concerns regarding whether fundamental results would be substantial enough to justify the massive capital investment surrounding AI.

On October 10th, tensions between the U.S. and China flared. Equity markets sold off following President Trump’s threat of a “massive increase” in tariffs on China with the Nasdaq-100 falling -3.49% and the S&P 500 falling -2.71% on the day. Volatility also spiked with the VIX Index closing the day at a level of 21.66, marking the first time the index closed above 20 since August 1st. Volatility ultimately peaked on October 16th as the VIX index posted an intraday high of 28.99, closing the day at 25.31. Both the intraday high and closing levels were the highest observed since April’s post Liberation Day sell off.

Despite the uptick in volatility throughout the month, better than expected early corporate earnings results served as a source of market confidence. Additionally, on October 29th, the Federal Reserve Open Market Committee (FOMC) announced the decision to cut interests rates by 0.25% to a range of 3.75% to 4.00%. The move was widely anticipated by Wall Street was met favorably, however, Federal Reserve Chairman, Jerome Powell stated that a rate cut at the December meeting was not a foregone conclusion which sobered equity markets expectations around the pace of the future cuts.

QQQ Performance

From a sector perspective, five of the ten sectors represented in QQQ finished in positive territory for October. Health Care was the best performing sector, which advanced by 8.89%, followed by the Utilities sector which returned 8.02%. QQQ’s relative outperformance versus the S&P 500 was driven by its overweight exposure to and differentiated holdings in the Technology sector and its lack of exposure to the Financials sector. The Technology sector averaged a 64.59% weighting within QQQ and saw total return of 6.99% compared to a 41.42% average weighting in the S&P 500 and total return of 6.04%. The Financials sector is not held within QQQ compared to the 10.37% average weighting within the S&P 500 for October with a total return of -3.83%.

Standardized performance - Performance quoted is past performance and cannot guarantee comparable future results; current performance may be higher or lower. Visit invesco.com/performance for the most recent month-end performance. Investment returns and principal value will vary; you may have a gain or loss when you sell shares. Fund performance reflects fee waivers, absent which, performance data quoted would have been lower. Invesco QQQ’s total expense ratio is 0.20%. Index performance does not represent fund performance.

The Health Care and Utilities sectors also contributed to QQQ relative outperformance vs. the S&P 500. The Health Care sector averaged a 4.35% weighting in QQQ and saw total return of 8.89% compared to an 8.60% average weighting in the S&P 500 and total return of 3.41%. The Utilities sector averaged a 1.45% weighting in QQQ and saw total return of 8.02% compared to a 2.63% average weighting within the S&P 500 and total return of 1.10% for October.

The quarterly earnings season began in October with 49 of 100 companies held in QQQ announcing by the end of the month. 91% of the companies which have reported have met or beat analyst expectations. Six out of the seven “Magnificent 7” companies reported quarterly results in October.⁶ Microsoft, Alphabet, Amazon, and Apple beat analyst earnings per share expectations, while Tesla and Meta fell short of analyst earnings expectations. From a revenue standpoint, Tesla was the only company of the six Magnificent Seven companies to have reported revenue which missed analyst expectations. Recent earnings in technology underscore the structural growth within AI, as the major players in the space signaled a considerable rise in capital expenditures amid the significant demand for AI and its necessary infrastructure. 

Artificial Intelligence continued to be a key area of focus for market participants. October kept pace with September’s deluge of notable announcements concerning key partnerships within the space. OpenAI announced plans to give Microsoft a 27% ownership stake totaling a value of ~$135 billion and clearing the way for the company to become a for-profit business. Microsoft will have access to OpenAI’s technology until 2032, including the models that achieved the benchmark of artificial general intelligence. Microsoft will continue to be entitled to receive 20% of OpenAI’s revenue. Broadcom shares surged on October 13th, as the company agreed to a multi-year agreement with OpenAI to co-develop 10 gigawatts of custom AI accelerators and systems. Broadcom agreed to develop and deploy systems designed to meet the global surge in AI computing demand across OpenAI’s facilities and partner data centers. PayPal also announced a notable deal with OpenAI where PayPal’s digital wallets will be embedded into ChatGPT, in a first-of-its-kind partnership. PayPal raised its full-year earnings guidance following the news.

Microsoft announced earnings on October 29th, reporting adjusted earnings-per-share of $3.78, beating consensus analyst estimates of $3.67.⁷ Microsoft also beat expectations with reported revenue of $77.7 billion considerably above the consensus analyst estimate of $75.6 billion. Growth within Microsoft’s Azure cloud computing segment continued to be significant as revenue growth associated with the segment grew 40% from the same period a year ago, posting $24.6 billion in revenue from the segment. The company announced demand continued to outpace supply across workloads despite the increased capacity that was opened up throughout the quarter. In the reporting period, Microsoft invested $34.9 billion in capex associated with AI infrastructure, as it continues to be one of the most significant investors in the space.

Amazon announced quarterly revenue growth of 13% and profit growth of 38%, both exceeding analyst expectations. Amazon Web Services growth delivered revenue of $33 billion for year-over-year growth of 20%, which was the strongest growth experienced for the segment since 2022.

Alphabet posted strong quarterly results reporting revenue of $102.3 billion, significantly exceeding consensus analyst estimates of $85.1 billion. Alphabet has been a significant beneficiary of the AI boom reporting cloud services revenue of $15.2 billion, solidifying cloud services as the company’s fastest growing segment. The company’s growth in adoption of its AI offerings surged. Additionally, management revised its capital expenditures projections up to a range of $91 billion to $93 billion, up from prior estimates of $85 billion, signaling significant demand and growth within the companies AI and cloud segments.

Trading Stats

For the month of October, shares traded of QQQ increased by 6.78% month-over-month along with notional value traded increased by 10.82% month-over-month. The month saw an average of 57.60 million shares trade each day (vs. 53.95 million last month) for a value of $35.16 billion (vs. $31.72 billion last month). That compares to averages of 65.21 million shares and $7.00 billion over the life of the fund, and 44.28 million shares and $23.58 billion for the past 12 months.