Invesco QQQ monthly review

Overview

• For the month of November, QQQ saw an NAV total return of -1.58% and underperformed the S&P 500 Index which returned 0.25%. The Russell 1000 Growth Index returned -1.81% underperforming QQQ, while the Russell 1000 Value Index returned 2.66%, outperforming QQQ.¹
• QQQ’s relative underperformance 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 Health Care sector.
• QQQ saw outflow of ~$906 million.
• QQQ ended the month with $403.30 billion in AUM and remained the 5th largest ETF in the U.S. (based on AUM).
• For the month of November, shares traded of QQQ increased by 12.18% month-over-month and notional value traded increased by 11.60% month-over-month.²

Market Recap

QQQ ended its streak of seven consecutive months of positive performance in November as the fund declined -1.58% on an NAV total return basis, underperforming the S&P 500 which returned 0.25%. In November, leadership in U.S. equity markets rotated away from mega cap growth and high beta names towards value and smaller cap stocks. The Russell 1000 Value increased 2.66% and outperformed the Russell 1000 Growth which decreased -1.81%. The Russell 2000, representing small caps, advanced 2.66%, while the S&P Midcap 400 advanced 2.05%, both outperforming the S&P 500 and Nasdaq 100, which returned -1.57%. The mixed results of equity market segments were mirrored by both positive and negative developments on the macroeconomic and policy fronts. The longest U.S. government shutdown on record ended in November while expectations of a December interest rate cut by the Federal Reserve Open Market Committee’s (FOMC) whipsawed throughout the month.³ Volatility, as measured by the VIX Index, also remained relatively elevated due to the whiplash regarding rate cut expectations as well as growing angst concerning elevated valuations in artificial intelligence (AI) names.⁴ And lingering debate regarding if the dominance and substantial investment supporting AI were indicative of a potential asset bubble. Volatility hit its highest closing level since the tariff driven shock in April on November 20^th when the VIX closed at a level of 26.42. 

Equity markets opened the month with a degree of caution as the ongoing U.S. Government shutdown persisted delaying key economic releases like non-farm payrolls for the month of October as well as the October Consumer Price Index results.⁵ October closed with the Federal Reserves’ FOMC meeting on October 29^th, where the FOMC announced the decision to cut the Fed Funds rate by 0.25% to a range of 3.75% to 4.00%. While the move was in line with the market expectations, 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. A more hawkish tone from the FOMC Chairmen created an additional layer of uncertainty for equity markets entering November.

Additionally, mixed labor market caused some concerns for investors early on in November Challenger Jobs report, a monthly report that is used as an indicator of labor market strength. The Challenger data indicated that jobs report marked the largest October jobs cut in more than 20 years. In contrast, the ADP research jobs data demonstrated October employment increased at U.S. companies. Additionally, the October ISM Services PMI released in early November, was reported above estimates indicating the U.S. services activity expanded at the fastest pace in the last eight months.⁶

The market received some welcome news as the longest U.S. government shutdown on record ended on November 12^th as President Trump signed a new continued resolution. The shutdown impacted the level of economic release published throughout the month with the lack of regular releases in part dampening recent equity market momentum. However, uncertainty regarding the Federal Reserve remained top of mind for investors. Markets sold off as markets expectations of a December rate cut continued to deteriorate. On November 13^th Minneapolis Fed President Neel Kashkari said he did not support the U.S. Central Bank’s last interest rate cut and was still undecided on the best course of action for the December meeting, which further drove down the markets expectation of rate cuts at the upcoming meeting. These fears were partially soothed a few days later, on November 17^th, when Federal Reserve Governor Christopher Waller reiterated his view that Fed policymakers should continue to lower rates in December, citing labor market weakness and restrictive monetary policy’s negative impact on lower income consumers.

Valuation concerns regarding AI flared again in November, despite generally upbeat earnings reports and guidance from companies within the AI ecosystem. On November 18^th, in an interview published by the BBC, Google CEO Sundar Pichai warned that today’s AI boom contains clear elements of irrationality echoing past bubbles, while stressing that AI will still be transformative. These comments further stoked angst around valuations around companies associated with the AI secular trend. Although fears of an AI bubble lingered demonstrated by the pullback in technology throughout the month, headlines continued to announce additional large scale strategic partnerships within the AI ecosystem. 

All eyes were on Nvidia earnings mid-month as the company’s results were largely viewed as a bellwether for not only AI, but the broader equity markets. Nvidia reported very strong results, however, profit taking continued through the end of the month in technology and the markets turned its focus back to the interest rates.

QQQ Performance

From a sector perspective, five of the ten sectors represented in QQQ finished in positive territory for November. Health Care was the best-performing sector, advancing by 10.29%, followed by the Energy sector which returned 5.65%. QQQ’s relative underperformance versus the S&P 500 was driven by its overweight exposure and differentiated holdings in the Technology sector and its underweight exposure to Health Care. The Technology sector averaged a 64.86% weighting within QQQ and saw total return of -2.27% compared to a 41.58% average weighting in the S&P 500 and total return of -2.06%. The Health Care sector averaged a 4.77% weighting within QQQ and saw total return of 10.29% compared to an 8.97% average weighting within the S&P 500 for November with a total return of 9.48%.

Standardized performance - Fund performance shown at NAV. Invesco QQQ's total expense ratio is 0.18%. Performance data quoted represents past performance. Past performance is not a guarantee of future results; current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and Shares. When redeemed, may be worth more or less than their original cost. See invesco.com to find the most recent month-end performance numbers. Market returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent
the returns an investor would receive if shares were traded at other times. Fund performance reflects applicable fee waivers. absent which. performance data quoted would have been lower. Returns less than one year are cumulative. Please keep in mind that high. Double-digit and/or triple-digit returns are highly unusual and cannot be sustained.

The Consumer Discretionary and Financials sectors also contributed to QQQ relative underperformance vs. the S&P 500. The Consumer Discretionary sector averaged a 17.82% weighting in QQQ and saw total return of -2.85% compared to an 14.03% average weighting in the S&P 500 and total return of -1.59%. The Financials sector is not held within QQQ compared to the 10.29% average weighting within the S&P 500 for November with a total return of 2.65%.

Despite November’s pullback in technology, a number of high-profile players within the AI ecosystem reported strong earnings throughout the month. The most widely watched report came in way of Nvidia. Nvidia was down over 12% for the month, despite considerably strong earnings release on November 19^th. The semiconductor company beat the revenue expectations of $55 billion, announcing $57 billion, a 63% year-over-year increase. Data center revenue saw year-over-year growth of 66%. And adjusted earnings-per-share came in at $1.30, topping the estimate of $1.26. GPU demand remained strong as inventory was fully utilized and sold out. Further, Nvidia reported free cash flow of $22B for the period, marking a 24% increase from a year earlier. Nvidia also raised its revenue guidance to $65B, which was significantly higher than the expectation of $62.7B signaling further optimism around the rapid growth within artificial intelligence. The bar continues to get higher and higher for Nvidia, however, the company has persistently found a way to surpass the significant expectations from the analyst community.

Palantir was another major player within AI to report earnings in November. Palantir’s stock price decreased 16% throughout the month as the company was a main culprit of profit taking surrounding the broader AI bubble angst. Despite the significant drop in share price in November, the company’s earnings release early in November demonstrated strong results. On November 3^rd, Palantir announced adjusted earnings per share of $0.21 above the consensus analyst estimate of ~$0.17.^7,8 Palantir reported record total contract value of $2.76B, representing a 151% increase in value year over year, as well as a 45% increase in customer count. Palantir also announced a significant upward revision to the company’s revenue guidance. However, strong results were not enough to fight the tide in November as profit taking within technology endured.

Advanced Micro Devices released quarterly earnings results on November 4^th. The semiconductor company and competitor to Nvidia, posted strong results, announcing record Q3 revenue of $9.25B. That exceeded expectations of $8.75B and marked a 36% increase from a year earlier. Earnings per share also exceeded the analyst community’s expectations as Advanced Micro Devices announced adjusted EPS of $1.20, above the consensus estimate of $1.16. Despite the strong top and bottom line results, shares fell following the announcement over concerns of compressed operating margins.⁹ Shares bounced following AMD’s analyst day on November 11^th as AMD outlined its plans to capture significant market share in what they estimated to be a $1 trillion AI data center market by 2030. The rally was short lived as the broader market rotation away from tech played out through the month.

Headlines regarding announcement of significant investment in AI continued throughout the month. Notably, Amazon announced a $50B plan for dedicated government AI supercomputing. Amazon announced it will invest up to $50B beginning in 2026 to expand capacity across Amazon Web Services (AWS) Top Secret, AWS Secret, and AWS GovCloud (U.S.), adding nearly 1.3 gigawatts of advanced compute power. Google also made headlines regarding its internally developed TPU chip, which was specially designed for AI inference.¹⁰ Reports noted that Google and Meta were in talks for Meta to rent multi-billion dollars’ worth of TPUs, which would be signal competition for Nvidia who currently has the most significant market share in the space.

Trading Stats

For the month of November, shares traded of QQQ increased by 12.18% month-over-month along with notional value traded increased by 11.60% month-over-month. The month saw an average of 64.62 million shares trade each day (vs. 57.60 million last month) for a value of $39.24 billion (vs. $35.16 billion last month). That compares to averages of 65.21 million shares and $7.09 billion over the life of the fund, and 47.11 million shares and $25.52 billion for past 12 months.