QQQ is Still the Preferred ETF for the AI Trade

Despite trade issues dominating the headlines, investors have not abandoned the secular theme of artificial intelligence and robotics. The average return for the Magnificent 7 stocks, most of which are important players in AI, was 35% from the April 8 market low to the end of Q2 vs. 3.7% for the other 493 stocks in the S&P 500.

ETFs that provide targeted access to robotics and AI companies are growing, with $18 billion in assets and $4.5 billion in net inflows year to date through July 9, 2025. However, these ETFs will need to compete for assets with the 800-pound gorilla in the room—the Invesco QQQ Trust (QQQ), and its cheaper cousin, the Invesco Nasdaq 100 ETF (QQQM), which tracks the same index at a lower cost. Although QQQ and QQQM are not explicitly designed as AI ETFs, they have become the investment vehicles of choice for this trade, since the Mag 7 constitutes almost 40% of the underlying Nasdaq-100 index. Table 1 compares some select AI- and robotics-focused ETFs to QQQ.

Comparison of Key Holdings and Active Share Relative to QQQ

QQQ was not designed with the purpose of providing AI and robotics exposure. It simply holds the 100 largest non-financial companies by market capitalization listed on the Nasdaq exchange, which tends to attract tech-oriented listings. The Mag 7 stocks make up over 40% of the fund’s exposure, providing convenient access to the AI theme. CFRA’s fundamental equity team estimates that the Big Four hyperscalers (Amazon, Microsoft, Alphabet and Meta Platforms) have added more AI compute than any category of the market over the last three-plus years. The team expects the Big Four to represent about 55% of total AI capital expenditure spend in 2025, down from about 60% in 2023.

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While the Big Four hyperscalers will still dominate AI capex spend, CFRA’s fundamental equity team expects a new wave of emerging hyperscalers to invest in their own data infrastructure. Most of those firms or partnerships are either currently private (e.g., OpenAI, xAI, Stargate) or non-U.S. sovereign projects (e.g., Humain AI in Saudi Arabia). However, some of the firms building specialized AI infrastructure (e.g., CoreWeave Inc.) or end applications (e.g. Tesla) are publicly listed.

This issue of whether the AI trade broadens significantly beyond the Mag 7 will determine whether the specialized AI and robotics ETFs attract more investor interest. Table 2 outlines the percentage exposure accounted for by the Mag 7 in QQQ and the four AI- and robotics-focused ETFs. The Dan Ives Wedbush AI Revolution ETF (IVES) comes closest to QQQ’s Mag 7 exposure with 32%, while the Global X Artificial Intelligence & Technology ETF (AIQ) is at 19%. The Global X Robotics & Artificial Intelligence ETF (BOTZ) and SPDR S&P Kensho New Economies Composite ETF (KOMP) are more Industrials sector-focused and have a much lower Mag 7 exposure at 11% and 3%, respectively.

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The industrials-focused AI and robotics ETFs (BOTZ and KOMP) are more differentiated from QQQ than the more software-oriented ones (AIQ and IVES), as measured by active share. Here active share is calculated by taking the sum of the absolute value of the differences of the weight of each holding in an ETF and the weight of each holding in QQQ and dividing by two. An active share of ~62% for AIQ and IVES indicates that they are fairly differentiated from QQQ. The very high active share of ~90% for BOTZ and KOMP indicates that they have minimal holdings overlap with QQQ, which may make them potential candidates for AI-focused investors looking to complement their existing QQQ holding.

Comparison of Sector Exposures and Returns

AIQ and IVES have a higher IT sector exposure than QQQ, while BOTZ and KOMP have a lower IT exposure and relatively higher industrials exposure (see Figure 1). IT makes up 53% of the exposure of QQQ, with 15% in Communication Services and 13% in Consumer Discretionary. In comparison, AIQ and IVES have 65% and 74% of their exposure in the IT sector, respectively. BOTZ and KOMP have a relatively higher Industrials focus, with the IT and Industrials sectors both constituting 41% of BOTZ and 31% and 25% of KOMP, respectively.

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This higher IT sector exposure in AIQ explains why it outperformed QQQ, KOMP, and BOTZ year to date through July 10, 2025 (IVES only listed in June 2025). Some international IT stocks like Samsung and SK hynix Inc. are held in AIQ but not in the other four ETFs. AIQ also holds some non-IT stocks like Siemens Aktiengesellschaft, Tencent Holdings and StoneCo, which have had strong year-to-date returns and are not held by its AI ETF peers.

Looking Ahead

It seems likely that AI will continue to be a focus for investors during the rest of 2025, and they will need to monitor a few important metrics. The first is whether AI capex spend and stock returns broaden beyond the Mag 7, particularly the Big Four hyperscalers. The second is whether non-U.S. Industrials and Communication Services firms benefit either from AI compute spend or application development. If either of these trends pans out, then investors will likely start to consider adding AI- and robotics-themed ETFs to their portfolios instead of being more narrowly focused on QQQ as their AI investment vehicle of choice.