Beyond AI: Reasons to Believe in Technology Stocks

Artificial intelligence (AI) is widely viewed as the fuel for the rocket known as growth and technology stocks in 2023. While there is truth to that notion, there’s more to the story. Including the “magnificent seven” cadre of mega-cap growth names that are powering the market higher this year.

Undoubtedly, AI is captivating investors and contributing to gains for the magnificent seven and other stocks residing in exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). However, AI is also in its infancy, implying there will be some volatility associated with this investment thesis.

For those considering funds like QQQ and QQQM, solid fundamentals support the investment cases behind many of their marquee holdings. Importantly, analysts are boosting earnings estimates in six of the magnificent seven with Tesla (NASDAQ: TSLA) being the outlier.

Positive Earnings Potential for QQQ Holdings

In what could prove to be good news for QQQ and QQQM, Amazon (NASDAQ: AMZN), Facebook parent Meta Platforms (NASDAQ: META) and semiconductor giant NVIDIA (NVDA) have seen third-quarter earnings per share estimates increase by double-digit percentages.

“That’s a marked contrast from the 0.4% downward revision for the S&P 500’s overall earnings this quarter, and 0.5% upward revision for the index next year. In fact out of the Magnificent Seven only Tesla, with downward earnings revisions across the board, has a worse outlook than the S&P 500,” reported Teresa Rivas for Barron’s.