Key insights
- The Invesco QQQ ETF, heavily weighted in tech and the "Magnificent Seven", is highlighted as a buy for May. Despite valuation concerns, its forward P/E is decreasing due to strong earnings growth, particularly driven by AI. Tech earnings are projected to outpace the broader S&P 500 in 2026 and 2027. Geopolitical and macroeconomic risks remain, but the overall outlook suggests continued upside for the ETF.
After being one of the worst-performing S&P 500 sectors during the first quarter of 2026, tech was up 27% in April. Just like that, it's now one of the best-performing sectors for the year as a whole and has lifted the S&P 500 and Nasdaq-100 indexes to new highs.
An easing of tensions in the Middle East has certainly helped, but so has the outlook for corporate earnings over the next few quarters. With the AI trade still in its early innings and investors appearing to be in more of a risk-on mood, one ETF stands out as a solid buy heading into May.
The Invesco QQQ ETF (QQQ +0.93%) isn't a pure tech ETF, but its 60% allocation to the sector, along with heavy concentration in the Magnificent Seven names, makes it pretty much act like one.
A lot of folks are nervous about valuations for this ETF and its components right now. That's understandable, but it's not entirely justified.
Currently, the Invesco QQQ ETF trades at a forward price-to-earnings (P/E) multiple of 23. That's actually a lot lower than it's been over the past few years. The encouraging part of this is that this number is coming down due to earnings growth, not multiple contraction.
AI development is likely to keep driving earnings growth for the foreseeable future. In 2026, S&P 500 earnings are expected to grow nearly 19% year over year, but tech earnings are forecast to grow by 38%. In 2027, earnings are expected to grow another 16% for the S&P 500 and 25% for the tech sector.
In other words, earnings are likely to keep driving share prices higher for the next several quarters, if not longer.
The fundamental story for this ETF is solid. Not only have valuations come down, but earnings growth is also expected to rise strongly. That combination is exactly what you want to see in an investment opportunity.
Geopolitical risks and macro factors, including labor and inflation, remain risks for the next leg of the tech rally. But the overall outlook for the Invesco QQQ ETF makes it an ETF to buy in May.