
MORE FROM INVESCO The investor’s guide to digital assets
Digital assets, such as cryptocurrency and blockchain, are becoming a major industry. In this guide, we provide investors insight into the asset class.
Invesco QQQ ETF (QQQ) bounced back from a challenging Q1 and advanced by 17.80% (on an NAV basis, 03/31/2025 – 06/30/2025). QQQ outperformed the S&P 500’s total return of -10.94% by 6.86% but slightly underperformed the Russell 1000 Growth Index’s 17.84% quarterly return by 0.04%.2 Year-to-date (through 06/30/2025), QQQ is up by 8.24% and has outperformed the S&P 500 Index (+6.20%) by 2.04% and the Russell 1000 Growth Index (+6.08%) by 2.16%. Seven of the ten sectors (per Industry Classification Benchmark- ICB), out of the ten that QQQ has exposure to, finished in positive territory for the quarter. Eight of the ten ICB sectors that QQQ has exposure to were positive contributors to relative performance against the S&P 500 Index.
QQQ’s overweight exposure to the Technology sector and underweight exposure and outperformance in the Health Care sector per ICB were the largest contributors to relative performance against the S&P 500 Index. For the quarter, the Technology sector averaged a 58.47% weight in QQQ (vs. a 36.07% weight in the S&P 500) and traded higher by 24.52% (vs. +23.80% in the S&P 500). Technology was the best performing sector in QQQ for Q2, rebounding from Q1 where it declined by nearly 12% and was the worst performing sector in the fund. During Q2, the Health Care sector averaged a 5.31% weight in QQQ vs. 9.63% weight in the S&P 500 Index. The sector declined by 0.12% within QQQ and fell by 0.92% in the S&P 500 Index.
After a difficult Q1 where NVIDIA dropped by 19.29% and was the largest detractor to QQQ relative performance, the company bounced back with a strong Q2 where it was the largest contributor to QQQ performance after advancing by 45.78%. The surge in performance was influenced by a few events in the quarter, with the April 9th announcement of the 90-day tariff pause sending shares higher by 18.72% in the session. This represented the best single day of performance in Q2. In mid-May, shares saw a three-day cumulative return of 16.02% across the trading sessions of May 12, 13 and 14 as President Trump traveled to the Middle East. Headlines from the trip included the US allowing Saudi Arabia increased access to artificial intelligence (AI)-enabled chips from NVIDIA, plans for NVIDIA to build AI factories in Saudi Arabia, the US allowing the United Arab Emirates to buy one million advanced NVIDIA chips, all of which were very positive for NVIDIA shares. On May 28th post market close, NVIDIA reported revenue and earnings that beat analysts’ expectations, NVIDIA’s earnings have become must watch on Wall Street as the company has become a bellwether for semiconductors, Artificial Intelligence and technology on the whole. Nvidia reported revenue of $44.1 billion, beating the consensus estimate by ~1.7%. The revenue figure represented 69% growth from the same period a year earlier. Additionally, Nvidia reported data center revenue of $39.1 billion, equivalent to a 73% increase from a year earlier. Growth in data center revenue was primarily driven by increased demand for accelerated computing platform usage for AI segments such as large language models, recommendations engines, as well as generative and agentic AI applications.3 While AI associated segments were the primary driver of the strong report, gaming revenue also experienced strong growth. Gaming revenue was reported at $3.8 billion, marking year-over-year growth of 42% for the segment. The quarter ended on a positive note, as the US and China seem to have a deal in place that may ease restrictions on China’s access to technology.
The second largest individual contributor to QQQ’s absolute performance for Q2 was Microsoft Corp. Q1 also saw Microsoft as a large detractor to absolute performance (the fifth-worst detractor in QQQ) after the stock declined by 10.76%, but Q2 performance of 32.75% was fueled by a strong earnings report. Microsoft reported quarterly results following market close on April 30 with both revenue and earnings beating the consensus analyst estimates. Microsoft reported revenue of ~$70.1B compared to consensus estimate of ~$68.5B. Further, Microsoft also exceeded analyst revenue expectations within the company’s cloud segments with reported Microsoft Cloud revenue of $42.4B compared to an estimate of $42.2B and Intelligent Cloud revenue of $26.8B compared to an estimates of $25.99B. Azure and other cloud services revenue (excluding Foreign Exchange activity) increased 35% year over year, exceeding analyst year over year growth expectations of 31%, with 16 points of Azure growth attributable to Artificial Intelligence (AI) compared to analyst expectations of 15.6 points.4 Microsoft reported operating income also exceeded analyst expectation with reported operating income of $32B compared to consensus estimate of $30.31B. Shares of Microsoft jumped by 7.63% in the trading session immediately following the announcement (May 1), and was the second-best day of performance for the stock in the quarter.
Q1 2025 earnings season officially came to a close in June, with QQQ companies in aggregate reporting very strong results. 70 of the 100 companies within QQQ, representing approximately 82% of the portfolio weight beat consensus analyst estimates for both revenue and earnings. The rates of top-line and bottom-line beats by index weight exceed those of the previous quarter’s reported results.5 Looking from a purely revenue perspective, 76 of the 100 QQQ companies, representative of 85.2% of the portfolio, reported revenue that exceeded analysts’ consensus revenue estimates, while 24 of the 100 QQQ companies, representative of 14.8% of the portfolio, missed revenue expectations. For the 76 companies reporting revenue beats, the average beat was 2.5% above consensus estimate, while the average miss for the 24 companies missing estimates was -2.5%. From an earnings view, 83 of the 100 QQQ companies, representative of 89.7% of the portfolio, beat consensus earnings estimates. Those companies, on average, beat forecasts by 9.0%. Meanwhile, 17 of the 100 QQQ companies, representative of 10.3% of the portfolio, reported earnings that missed analysts’ expectations, with an average miss 8.4% below analyst estimates.
Nasdaq-100 companies reported results demonstrated significant fundamental growth from results in the same period a year earlier. The weighted average earnings growth for the Nasdaq-100 was 21.6%, outpacing the weighted average of the S&P 500 at +13.0% growth.
The best-performing stocks in QQQ for Q2 were Broadcom Inc. (+65.02%), Palantir Technologies Inc. (+61.52%) and Constellation Energy (+60.29%). The worst performers for the quarter were Regeneron Pharmaceuticals (-17.10%), Lululemon Athletica Inc. (-16.07%) and The Kraft Heinz Co. (-13.88%).
Source: Bloomberg L.P., as of 06/30/2025.
Note: All periods represent calendar years. Click for standardized performance. Performance data quoted represents past performance, which 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. An investor cannot invest directly in an index. Index returns do not represent Fund returns. Invesco QQQ’s total expense ratio is 0.20%.
The quarter started off on a challenging foot with President Donald Trump’s Liberation Day on April 2nd. Wide-ranging baseline and reciprocal tariffs across all trading partners were announced, and equity markets immediately came under pressure. In the four trading sessions following the tariff announcement (04/02/2025 – 04/08/2025), QQQ traded lower by 12.71% as market participants scrambled to decipher potential implications on prices, supply chains, corporate earnings and more. Sentiment changed on April 9th, after President Trump announced a 90 day pause on country specific tariffs providing a catalyst for one of the strongest single day upswings on record. QQQ finished the trading session higher by 12.02% while the S&P 500 Index posted a single day return of 9.52%. While details of tariff-driven trade deals remain sparse, equity markets continued their march higher, with April 8th representing the lowest closing price of the month.
Concerns around the United States’ relationship with China, the world’s second largest economy remained front of mind for much of Q2. Although, as the quarter came to a close, market participants had reason to be optimistic about the state of US-China relations. On June 11th, US Treasury Secretary Scott Bessent met with the Chinese Vice Premier in London with talks focused on the easing of restrictions on Chinese exports of rare earth metals and U.S. technology export restrictions. Concerns were raised again on June 20 after reports that rare mineral shipments from China to the U.S. were being delayed, stoking investor fears for a potential breakdown in negotiations. However, on June 26th President Trump announced that a trade framework with China had been finalized, emphasizing Chinese agreement to ease rare earth mineral restrictions while the U.S. agreed to ease some export restrictions.
Although economists, company executives, strategists and more continue to reference uncertainty around tariffs, inflation readings throughout the quarter showed little to no change in price gauges. The year-over-year Consumer Price Index readings for March, April and May (released in April, May and June) were reported at 2.4%, 2.3% and 2.4%, respectively. These represent the lowest 3 consecutive-month readings since the January, February and March readings of 2021. The Core Consumer Price Index (CPI) readings which strip out food and energy prices for March, April and May (reported in April, May and June) were all reported at the same 2.8% year-over-year growth level.6 Similarly, this represents the lowest three consecutive month reading since January, February and March 2021 and the only readings under 3.0% since March 2021.
Over the course of the second quarter, the Federal Open Market Committee (FOMC) met twice, in May and June.7 During both meetings the Federal Reserve (Fed) elected to keep its target rate steady at 4.25% - 4.50%, the same range that it has remained since December 2024. Throughout the quarter, negative comments from President Trump about the Federal Reserve and Chairman Powell intensified, as he continued to call for a rate cut. Following news that the June Fed meeting did not bring a rate cut, Trump argued that the target rate should be 2 full percentage points lower than its current range. In the press conference, Chairman Powell emphasized that he believes the central bank is “well positioned to wait” when it comes to any changes in monetary policy. The Fed’s statement following the meeting had one major change as it says, “uncertainty about the economic outlook has “diminished but remains elevated,” from “uncertainty about the economic outlook has increased further.” Language around risks to both sides of the Fed’s dual mandate was also softened as it mentioned that the Committee is attentive to risks but removes language around higher risks of higher inflation and higher unemployment having risen. The June meeting did bring the latest release of the Fed’s Summary of Economic Projections8 and there were revisions to expectations for Gross Domestic Product (GDP) and prices that reflect uncertainty from tariff impacts.9 The 2025 and 2026 GDP projections were lowered to 1.4% and 1.6%, respectively (down from projections of 1.6% and 1.8% at the March meeting) while the 2027 projection remained steady at 1.8%. The Committee expects the unemployment rate to be higher than its previous forecast in March with the 2025, 2026 and 2027 unemployment rate at 4.5%, 4.5% and 4.4%, respectively, up from the March projections of 4.4%, 4.3% and 4.3%, respectively. The lower economic outlook likely stems from the expectation for upward pressure on prices as projections for Personal Consumption Expenditure (PCE) inflation was raised for 2025 (to 3.0% from 2.7% in March), 2026 (to 2.4% from 2.2% in March) and in 2027 (to 2.1% from 2.0% in March).10 Expectations for Core PCE inflation, which excludes the more volatile food and energy components, were similarly raised for 2025 (to 3.1% from 2.8% in March), 2026 (to 2.4% from 2.2% in March) and 2027 (to 2.1% from 2.0% in March). Despite the lingering concerns around the upward pressure that tariffs can cause on prices, and the related downward impact on economic activity, the Fed’s dot plot shows that FOMC participants still expect two rate cuts this year. Two cuts would bring the target rate down to 3.75% - 4.00%.
Source: Bloomberg L.P., as of 06/30/2025.
Like Q2, we expect heightened focus on any headline or development around tariffs over the course of the third quarter. Originally, the 90-day pause on tariffs announced on April 9 were set to expire on July 9th, but at the time of writing (7/7) the deadline has been pushed to August 1 by Executive Order. A number of countries have received their letters outlining their reciprocal tariffs with more expected to be sent in the following weeks. We will pay keen attention to key price gauges (CPI, PCE, Producer Price Index, etc.) to assess inflationary pressures that are associated with tariff implementation.11
The Federal Reserve is scheduled to hold two meetings over the course of Q3- in late July and mid-September, with the September meeting bringing a fresh round of the Summary of Economic Projections. The Kansas City Fed is also scheduled to hold its annual Economic Policy Symposium in Jackson Hole, Wyoming in late August.12 This year’s theme is "Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy." Historically, the Symposium has given insight into the Fed’s thinking on future monetary policy, as the meeting will cover economic outlook, risks to the economy and other topics. The meeting will also loosely coincide with the completion of the Fed’s five-tier monetary policy framework review which is expected to conclude by the end of summer. The review looks back at the previous five years and reviews changes in the macroeconomic backdrop along with ways that monetary policy should effectively address those changes. Upon completion, the Fed is expected to report its findings along with any adjustments to its view on monetary policy. With only four remaining Fed meetings for 2025, and the Fed dot plot showing participants expecting two rate cuts, every meeting or speech from Fed participants will be watched closely for clues on timing of a rate cut, or a change in policy.13
As always, earnings releases for QQQ companies are scrutinized very closely. Not only are the business results important, but revenue and earnings guidance along with commentary about future outlook can have outsized effects on stock price performance. Any insight into companies’ approach towards or impact from tariffs will be closely watched by market participants. With QQQ companies’ strong earnings results (~23% year-over-year growth by the Nasdaq 100 Index), investors will be keen to see if that level of growth can be repeated in the next round of earnings releases. The end of July and early August will see many of the largest companies within QQQ report their business results, with semiconductor giants NVIDIA and Broadcom expected to report in late August and early September, respectively.
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Digital assets, such as cryptocurrency and blockchain, are becoming a major industry. In this guide, we provide investors insight into the asset class.
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All data is from Bloomberg, L.P. as of 06/30/2025, unless otherwise noted.
All returns are based off NAV. Returns are cumulative unless otherwise noted.
Holdings are subject to change and are not buy/sell recommendations.
These comments should not be construed as recommendations. 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.
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.