
Market outlook Navigating market concentration wisely
Well-worn investment narratives will come and go. QQQ’s focus on innovation has remained constant.
The “Magnificent 7”—Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla—have been making headlines again in 2025. Their size and volatility have driven both breathtaking rallies and stomach-churning drops in the overall U.S. stock market.
The global reach of the Mag 7 means they have been particularly sensitive to concerns over the potential impact of tariffs and trade disruption. This closely followed group of stocks has also fueled debate in recent years about concentration, or the market’s reliance on a handful of tech giants.
Although the swings that Invesco QQQ ETF has endured this year are never fun for investors, zooming out for perspective may help. QQQ has a history of innovation and rewarding long-term investors for enduring volatility. In fact, pullbacks like the one this year may provide long-term investors with an opportunity to get exposure to innovative companies at more attractive prices.
As of June 2, 2025, the Mag 7 made up 39.4% of QQQ, which tracks the Nasdaq-100® Index.1 Other popular indices for U.S. large-cap stocks that weight individual stocks by their size (market-cap weighting) have seen similar concentration in some of their top holdings. The S&P 500® Index held 35.8% in its top 10 constituents as of May 30, 2025.2
It’s important to remember that there have been other periods in history when a few stocks had an outsized impact on U.S. equity indices. For example, during the dot-com boom of the late 1990s, it was tech giants like Microsoft, Cisco, Intel, and Oracle.
The simple math is that market leaders can power indices like the Nasdaq-100 when they’re doing well. It cuts both ways, though, on the downside.
In 2023, a great year for the Mag 7, QQQ rallied 54.7%. That more than doubled the 26.0% return for the Russell 3000® Index, which is considered representative of the U.S. stock market.
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 fee waivers, absent which, performance data quoted would have been lower.
In 2025, however, the stock swings of the Mag 7 have resulted in a volatile ride. QQQ shed about 25% of its value from the February intraday high to the April intraday low3 before bouncing back.
Still, QQQ’s long-term track record is a testament to its ability to weather concentration-driven storms. Since its inception in March 1999, QQQ has delivered an annualized return of 9.6%, compared with 8.0% for the Russell 3000.
The Mag 7’s influence on QQQ isn’t a flaw—it’s a feature. These companies are the backbone of the modern economy, leading in AI, cloud computing, and digital services. Given their impressive growth in earnings and revenue, it’s not surprising that investors have favored the stocks.
For calendar year 2025, Mag 7 earnings are expected to rise 12.6% following 40.4% profit growth in 2024.4
Despite tariff headwinds—like April’s proposed levies on Chinese imports—these firms continue to innovate. QQQ’s focus on innovative companies may help position investors to capture the next wave of growth if they can ride out the short-term volatility.
Although the Mag 7 may grab the headlines, QQQ is designed to hold all 100 stocks in the Nasdaq-100 spanning sectors outside of tech like health care, consumer discretionary, and industrials.
The Mag 7’s outsized role in QQQ, evident in 2025’s tariff-driven rollercoaster, underscores both its volatility and its potential. But history tells a clear story: Staying invested in QQQ through concentration-driven turbulence has the potential to deliver attractive long-term results.
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Past performance is not a guarantee of future results. An investor cannot invest directly in an index.
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.
Growth stocks tend to be more sensitive to changes in their earnings and can be more volatile.
The Magnificent Seven stocks are a group of high-performing and influential companies in the U.S. stock market: Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla.
Russell 3000® Index includes those Russell 3000® companies with higher price-to-book ratios and higher forecasted growth values.
The price-to-book ratio considers how a stock is priced relative to the book value of its assets.
The Nasdaq-100® Index is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange.
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.
Diversification does not guarantee a profit or eliminate the risk of loss. This content should not be construed as an endorsement for or recommendation to invest in Apple, Microsoft, NVIDIA, Amazon, Alphabet, Meta, or Tesla. Neither Apple, Microsoft, NVIDIA, Amazon, Alphabet, Meta, nor Tesla are affiliated with Invesco. Only 7 of 101 underlying Invesco QQQ ETF fund holdings are featured. The companies referenced are meant to help illustrate representative innovative themes, not serve as a recommendation of individual securities. Holdings are subject to change and are not buy/sell recommendations. See invesco.com/qqq for current holdings. As of June 11, 2025, Apple, Microsoft, NVIDIA, Amazon, Alphabet (Class A and C), Meta, and Tesla made up 7.47%, 8.59%, 8.62%, 5.66%, 2.56% + 2.43%, 3.77%, and 2.91%, respectively, of Invesco QQQ ETF. View all Holdings.