QQQ And Tech Earnings: They Can't All Win The CapEx Arms Race

A.J. Button 13K Followers Follow 5 Share Save Play ( 10min ) Comments Summary The QQQ's top holdings—that is, big tech stocks—are in an AI-driven arms race, with rising CapEx and negative free cash flow emerging. The fund's constituents increasingly compete in commoditized cloud services, while chipmakers capture most AI-related free cash flow. Granted, some of the chipmakers are themselves big QQQ holdings (e.g., NVDA). But more of the top 10 are in the "AI CapEx spender" category than the "chipmaker" category. At 34x earnings and 10x book, QQQ appears expensive given intensifying competition and FCF pressures among its top holdings. I nonetheless rate QQQ a hold, favoring caution over aggressive selling, as select winners like AAPL, GOOGL, and NVDA could still buoy the index. Eric Trump at the NASDAQ. The QQQ is built on one of NASDAQ's indexes. Michael M. Santiago/Getty Images News This past week, investors got their first peek at how the AI investment situation looked at U.S. big tech companies in the This article was written by A.J. Button 13K Followers Follow Financial journalist. Passed CFA Level 1. Seeking value and dividend growth opportunities, and sharing what I find on Seeking Alpha. Analyst’s Disclosure: I/we have a beneficial long position in the shares of GOOG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.