Popular QQQ ETF faces a crucial moment with Nvidia earnings on deck after its rare pullback

By Christine Idzelis

Tech giant Nvidia, the ETF's largest holding, will report earnings Wednesday

Investors are bracing for earnings results from tech giant Nvidia, a top holding of a popular ETF tracking the Nasdaq-100 Index.

Investors appear unusually jittery over technology stocks lately.

A popular exchange-traded fund that tracks the Nasdaq-100 Index NDX and is known by its ticker symbol "QQQ" has posted a loss over the trailing 50-days - something the tech-heavy equities ETF seldom has done, according to DataTrek Research.

The Invesco QQQ Trust Series QQQ is down 3.2% over the last 50 trading days, DataTrek co-founder Jessica Rabe said in a note emailed Wednesday. That's "unusual because the Nasdaq-100 has an excellent win rate," making money 74% of the time over any given 50-day holding period since 2015, she wrote.

Wednesday will be an important day for the QQQ ETF, as all eyes will be on the fourth-quarter earnings results of artificial-intelligence-chip maker Nvidia (NVDA) after the closing bell. The closely watched Big Tech company, which is the fund's top holding, has a massive market value of around $4.7 trillion, based on FactSet data.

Still, "it will likely take a macro shock, not just micro concerns about monetizing AI investments, for the Nasdaq-100 to enter a painfully swift correction" of at least 10%, Rabe said.

The QQQ ETF has seen 50-day losses of 10% or more just 6.5% of the time over the last 11 years, she found, pointing to the chart below. Most recently, those periods included last year's "trade-policy shock," the chart shows, when President Donald Trump announced tariffs in April.

DATATREK RESEARCH

The tariff situation is still evolving. While the Supreme Court on Friday rejected Trump's use of tariffs under the International Emergency Economic Powers Act, the president promptly moved to expand his tool kit to impose trade duties.

The U.S. stock market has been putting in a mixed performance this week despite AI jitters and renewed tariff uncertainty, with the QQQ ETF up around 1.2% in midday trading Wednesday.

"On the plus side, the QQQ's recent 50-day returns are below the average drawdown, suggesting markets are looking past occasionally troubling macro headlines," said Rabe.

"On the downside, the Nasdaq-100 will likely keep churning until U.S. Big Tech can prove their AI spending will pay off," she noted. "Either that, or a new positive catalyst - such as their curtailing expected AI capex - comes along to give the QQQs some positive momentum."

While software stocks have recently sold off amid fears over AI disruption, "the Nasdaq-100 is somewhat insulated" from the slump as it has "double the exposure to semiconductors," an area of the market that is up so far this year, according to Rabe.

She pointed to the VanEck Semiconductor ETF's SMH16.4% gain this year through Tuesday, which is a stark contrast to the iShares Expanded Tech-Software Sector ETF's IGV 25.8% loss over the same stretch.

Semiconductor giant Nvidia has the potential to pause the recent rotation out of Big Tech in the U.S. stock market, according to Angelo Kourkafas, senior global strategist at Edward Jones.

"Any strong guidance from Nvidia can help reinvigorate that tech trade, which has been underperforming" and weighing on stock-market indexes such as the Nasdaq-100 and S&P 500 SPX, he said in a phone interview Wednesday. "This comes at the point where there is a lot of debate around artificial intelligence" in the market, as well as concerns about Big Tech performance.

The top seven holdings of the Invesco QQQ Trust Series as of Feb. 23 were Nvidia , Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Tesla (TSLA), Facebook parent Meta Platforms (META) and Google parent Alphabet (GOOGL) (GOOG). Those Big Tech stocks, collectively known as the "Magnificent Seven," have mostly struggled so far this year, according to FactSet data.

The QQQ ETF was up a modest 0.2% on the year as of midday Wednesday, according to FactSet data. The S&P 500, a gauge of U.S. large-cap stocks, was rising 0.7% midday for a year-to-date gain of 1.3%.

-Christine Idzelis

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

02-25-26 1300ET