QQQ underperformed the S&P 500, breaking a streak of four consecutive months of outperformance. QQQ fell 6.60% on an NAV total return basis versus the S&P 500’s 0.06% loss. U.S. equity markets experienced a more volatile and rotational environment in July after a strong first half of the year. While broad market performance was relatively muted, leadership shifted away from some of the market's largest artificial intelligence (AI)- and technology-related stocks as many investors reassessed valuations, capital spending trends, and the sustainability of earnings growth. This resulted in many growth-oriented segments of the market lagging more cyclical, value-oriented, and equal-weighted benchmarks. Meaningful exposure to the large technology companies created drag for S&P 500 last month, however corporate earnings, while mixed, remained mostly constructive helping fuel outperformance of the S&P 500 Equal Weight Index3 which posted return of 1.01% in July.
Investors appeared to favor value stocks over growth stocks throughout July. Mega-cap growth, represented by the Nasdaq-100 Index, was down significantly, with a -6.59% return, while the Russell 1000 Growth Index also fell -4.76% in July. The Russell 1000 Value Index rose 3.82% and led other market segments indicative of investor preference for value over growth throughout the month. Large capitalization securities, represented by the S&P 500 index, fell modestly with a return of -0.06% and outpaced small and mid capitalization securities. Small cap, represented by the Russell 2000 Index,4 lagged with a decrease of -3.03%, while mid capitalization securities, represented by the S&P MidCap 400 Index,5 faired slightly better, with a decrease of -2.38% on the month.
July was characterized by uncertainty. Equity market leadership continued to shift as demonstrated by the sharp reversal in the artificial intelligence trade. Tailwinds supporting the ongoing AI infrastructure buildout persisted throughout with the announcement of Amazon’s $25 billion bond sale to fund AI spending and both Amazon and Alphabet reported considerably higher guidance regarding their respective full year 2026 capital expenditure estimates. Despite the significant hyperscaler spending commitments, semiconductor companies experienced sharp selloffs throughout the month on concerns surrounding whether massive artificial intelligence investments will justify lofty valuations. The Philadelphia Semiconductor Index, which is a modified market capitalization index comprised of companies that are involved in the design, distribution, manufacturing and sale of semiconductors fell a staggering -20.58% in July.
Despite the sharp selloff in growth and particularly AI related names, and periodic bouts of volatility throughout the month, the VIX Index,6 a measure of equity market volatility, closed out July at a level of 15.99, -2.80% lower than the previous month’s ending index level. Volatility spiked to its highest closing level of 20.66 on July 29th driven by a confluence of the deepening selloff in semiconductors and other AI related names, hawkish interpretations of the July 29th Federal Reserve FOMC meeting, and a flare up in geopolitical tensions between the US and Iran that sent Brent Crude toward $90 a barrel and renewed broader inflationary concerns.
Macroeconomic data prints in July were mixed. On July 2nd, June nonfarm payrolls were reported at 57,000, softer than the consensus estimate. Prior months reports were also revised downward indicating previous momentum was less notable. The unemployment rate fell to 4.2%, but was primarily driven by dropping labor force participation. Inflation data provided a degree of relief for equity markets. The Producer Price Index (PPI) ex-food and energy7 rose 4.7% year-over-year in June, softer than anticipated and the overall PPI decelerated to 5.5% year over year (YoY), aided partially by a pullback in energy costs. The headline Consumer Price Index (CPI)8 fell -0.4% month-over-month (3.5% year-over-year), both below investor expectations. In testimony before congress on July 14th, Federal Reserve Chairman, Kevin Warsh, acknowledged the softer than anticipated inflation prints in June, but cautioned that the Fed may need to eventually respond if inflation remained elevated. Inflation fears were further renewed later in the month when brent crude oil9 closed above $100/ barrel on July 23rd.
On July 29th the Federal Open Market Committee (FOMC)10 announced the decision to hold rates steady at 3.50% – 3.75%, however three dissents within the committee signaled a more hawkish stance than was expected. Chairman Kevin Warsh’s press conference did not offer much clarity by way of the Fed’s view on the path forward and touched on the potential to rethink how the Fed assesses inflation which further fueled investor uncertainty regarding expectation of the future rate path.
Four of the nine sectors represented in QQQ finished July in positive territory. Energy was the best performing sector, returning 12.05%, followed by Industrials and Consumer Staples, which returned 5.06% and 3.47%, respectively. Technology was the worst performing sector, returning -9.15%, followed by Telecommunications and Basic Materials, which returned -8.83% and -6.38%, respectively.
QQQ’s relative underperformance versus the S&P 500 was primarily driven by its differentiated holdings in and average overweight to the Technology sector. QQQ’s Technology holdings average weight was 66.53% and returned -9.15% in July, while the S&P 500’s Technology holdings average weight was 43.52% and returned -3.07%. QQQ had an average overweight of 23.01% to the Technology sector in the month.
QQQ’s differentiated holdings and underweight in the Industrials sector were the greatest contributor to the fund’s relative performance. QQQ’s Industrials holdings average weight was 3.34% and returned 5.06% in July, while the S&P 500’s Industrials holdings average weight was 11.10% and returned 0.07%. QQQ had an average underweight of 7.76% to the Industrials sector in the month.
On June 26th, post market close, Nasdaq announced that Space Exploration Technologies (“SpaceX”) would be included in the Nasdaq-100 Index under the new Fast Entry provisions prior to market open on Tuesday, July 7th. On July 7th 2026, SpaceX entered the Nasdaq 100 Index and QQQ with a weight of 1.27%. SpaceX along with many of technology names, experienced notable volatility in July, with SPCX shares falling ~31% throughout the month.
July marked the beginning of earnings season with major announcements occurring throughout the month. Of the 37 companies held within QQQ that announced earnings results in July, 28 companies representing an aggregate portfolio weight of ~21.88% recorded earnings per share (EPS) above consensus estimate. Seven companies representing an aggregate portfolio weight of ~6.70% missed consensus estimates.
Six of the “Magnificent 7”11 companies (Alphabet, Amazon, Apple, Meta, Microsoft, and Tesla) reported earnings in July. On July 22, 2026, Alphabet announced its Q2 2026 results. Alphabet posted strong results for the quarter exceeding the consensus analyst estimate on both earnings and revenue. Alphabet announced earnings per share (EPS) of $9.11 significantly beating the consensus EPS estimate of $2.91. The strong beat was inflated by paper gains recorded on the company’s investments in Anthropic and SpaceX. Alphabet announced total revenue of $119.8B which represented year-over-year (YoY) growth of ~24% and exceeded the consensus revenue estimate of $117.0B. Google Cloud revenue grew 82% YoY with reported revenue for the cloud division totaling $24.8B, exceeding the consensus estimate of $22.5B. Google Cloud’s contracted backlog also grew to $514B, up from a Q1 2026 total of ~$460B. Some of the most significant information reported was Alphabet’s capital expenditure guidance, which the management revised upward to a range of $195B to $205B from a previous ceiling of ~$190B. The guidance reignited concerns over AI related spending and sent shares lower by ~6% following the earnings call.
Microsoft announced on July 29th, reporting revenue of $90B which marked YoY growth of 18% and exceeded the consensus estimate of $87.7B. Microsoft announced EPS of $4.81 beating the consensus estimate of $4.25. This announcement marked Microsoft’s 14th consecutive quarter of beating both revenue and earnings estimates. Azure grew 43%, its fastest pace since 2022. Additionally, the Intelligent Cloud segment reported revenue of $39.3B for YoY growth of 31%, beating the consensus estimate of $38.2B. On July 30th, shares rallied as much as 16%, marking Microsoft's largest single day gain since March 2020.
On July 30th, Amazon reported a standout quarter. Amazon reported revenue of $200.6B, above the consensus estimate of $197.0B. Amazon Web Services (AWS), announced revenue of $42.2B, above the consensus analyst estimate of $40.6B. The growth in AWS was significant as the segment posted YoY growth of 37% which was the fastest growth rate for the segment in the last 18 quarters. EPS totaled $5.75 above the consensus estimate of $1.83. Amazon shares surged ~14% on July 31 as investors interpreted accelerating AWS growth as proof of concept and the tangible results justifying Amazon’s significant investment in AI infrastructure.
Source: Bloomberg, L.P., and Nasdaq as of 7/31/2026.
Standardized performance - 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. Invesco QQQ’s total expense ratio is 0.18%.
For the month of July, shares traded of QQQ decreased by 22.32% and notional value traded decreased by 24.67% month-over-month. The month saw an average of 40.68 million shares traded each day (vs. 52.37 million last month) for an average daily value of $28.46 billion (vs. $37.78 billion last month). That compares to averages of 64.90 million shares and $7.75 billion over the life of the fund, and 53.54 million shares and $33.53 billion for the past 12 months.
Select the option that best describes you, or view the QQQ Product Details to take a deeper dive.
NA5831851
All data is from Bloomberg, L.P. as of 7/31/2026, unless otherwise noted.
Past performance is not a guarantee of future results.
An investor cannot invest directly in an index. Index returns do not represent Fund returns.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional/financial consultant before making any investment decisions.
The opinions expressed are those of the author, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.
Growth stocks tend to be more sensitive to changes in their earnings and can be more volatile.
The Index and Fund use the Industry Classification Benchmark (“ICB”) classification system which is composed of 11 economic industries: basic materials, consumer discretionary, consumer staples, energy, financials, health care, industrials, real estate, technology, telecommunications and utilities.