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5 Stocks That Powered a Historic May for Nasdaq ETF

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The tech-heavy Nasdaq Composite Index wrapped up a historic month, outperforming the Dow Jones by the widest margin since October 2001. The artificial intelligence (AI) boom, cooling inflation, bets on Fed’s rate hike pause and better-than-expected earnings drove the stocks higher.

Invesco QQQ (QQQ - Free Report) , which serves as a proxy to the Nasdaq Index, jumped 8% in a month. We have highlighted the five best-performing stocks of QQQ from last week that led the way higher in the portfolio. These include Marvell Technology (MRVL - Free Report) , Zscaler (ZS - Free Report) , Datadog (DDOG - Free Report) , Nvidia Corporation (NVDA - Free Report) and Advanced Micro Devices (AMD - Free Report) .

Most of the outperformance was fueled by a huge surge in tech stocks, especially the mega caps, which have strong balance sheets, durable revenue streams and robust profit margins. They are better positioned to withstand a possible economic downturn (read: 5 ETFs Leading the Tech Outperformance in May).

The “Magnificent Seven” (the term given by Bank of America strategist Michael Hartnett) — Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), Tesla (TSLA) and Nvidia — saw a huge rally last month. In particular, Nvidia joined the trillion-dollar market capitalization club and became the first chipmaker ever to hit the trillion level.

The rally is further supported by bets that the Fed is nearing the end of its interest rate hiking cycle, a move that would likely be bullish for stocks. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.

Let’s take a closer look at the fundamentals of QQQ.

QQQ in Focus

Invesco QQQ provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq. It is one of the largest and most popular ETFs in the large-cap space, with AUM of $188.3 billion and an average daily volume of around 48 million shares. Invesco QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Nvidia, AI boom & Chip ETFs).

Below, we have highlighted the above-mentioned five stocks in the ETF with their respective positions in the fund’s basket.

Top-Performing Stocks in QQQ

Marvell Technology is a fabless designer, developer and marketer of analog, mixed-signal and digital signal-processing integrated circuits. The stock makes up for 0.27% share in the QQQ basket and has soared nearly 53% over the past month.

Marvell Technology carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Zscaler is one of the world’s leading providers of cloud-based security solutions. The company offers a full range of enterprise network security services, including web security, Internet security, antivirus, vulnerability management, firewalls, and control over user activity in mobile, cloud computing, and Internet of Things environments. Zscaler has an estimated earnings growth rate of 123.2% for the fiscal year (ending July 2023).

The stock has soared about 52% in a month and makes up for a 0.13% share in the QQQ basket. Zscaler has a Zacks Rank #3 and a Growth Score of A.

Datadog is a monitoring and analytics platform for developers, IT operations teams and business users in the cloud age. The company’s business runs around its portfolio of over 400 out-of-the-box integrations, including public cloud, private cloud, on-premise hardware, databases and third-party software. The stock has jumped 19.4% over the past month and accounts for a 0.16% share in the ETF.

Datadog has an estimated earnings growth rate of 19.39% for this year. It has a Zacks Rank #3 and a Growth Score of B.

Nvidia is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. The stock has jumped 37% in a month, and its earnings are expected to grow 46.7% for the fiscal year (ending January 2024).

Nvidia makes up for 6.6% of assets in QQQ and has a Zacks Rank #1 (read: Nvidia Hits Trillion-Dollar Market Cap: 5 ETFs to Track).

Advanced Micro Devices has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focus company from a pure-bred consumer-PC chip provider. The stock has rallied about 33% in May and makes up for 1.2% in the QQQ portfolio.

Advanced Micro Devices has a Zacks Rank #3.

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