By The Nasdaq 100 index jumped to a record high this year, helped by the ongoing artificial intelligence wave and the Federal Reserve interest rate cuts. It soared to a high of $21,185 this month, bringing the year-to-date gains to 22.50%. This article looks at the best and worst performers in the index and why the Invesco QQQ ETF (QQQ) may reverse soon.
Technology companies are doing well
The Nasdaq 100 index has jumped, helped by NVIDIA, which has turned into the biggest company in the world with a valuation of over $3.4 trillion. NVIDIA’s growth happened as the company continued to fire on all cylinders, with its revenues in the first nine months of the month jumping to over $91 billion.
NVIDIA’s chips have seen substantial demand in the past few years, as companies like Microsoft, Google, and Amazon continue purchasing tons of them. The company has also benefited from its CUDA software that helps to configure general-purpose GPUs into ones that can be used in the AI industry.
Constellation Energy stock has also jumped by 112%, making it the second-best performer in the Nasdaq 100 index. This stock surged after the company inked a partnership with Microsoft, the third-biggest company globally. The deal will see it restart a nuclear power plant and supply it to MSFT’s data centers.
Arm Holdings, a top British company, has also done well this year as it jumped by 85%. Like NVIDIA, this performance is because of the AI industry. Also, Arm has one of the best business models since it mostly licenses its technology, which explains why it has a gross margin of 96%.
Trade Desk and other companies providing advertising technology like Zeta Global have done well amid resilient demand. TTD shares have soared by about 80% this year, making it one of the top performers in the index.
The other top gainers in the Nasdaq 100 index this year are firms like Netflix, Meta Platforms, Fortinet, Intuitive Surgical, Marvell Technology, T-Mobile, and Broadcom.
A clear theme among the top performers is that most of them are in the artificial intelligence space that is booming.
The top laggards in the Nadaq 100 index are companies like Moderna, Dollar Tree, Intel, Biogen, Dexcom, Lululemon, Pdd Holdings, Globalfoundries, Idexx Laboratories, and Microchip Technology.
Why the QQQ ETF stock may drop
The Nasdaq 100 index has a long history of doing well and has constantly beaten other indices like the S&P 500, Russell 2000, and the Dow Jones. This growth happened because it is mostly made up of technology companies that have a track record of growth.
Tech companies often have large moats, predictable revenues, and high margins. Think of a company like NVIDIA that has constantly innovated and launched new products that are hard to replicate.
Still, there are three main reasons why the QQQ ETF may reverse soon. First, the fund has become highly overvalued as it trades at a PE ratio of 36. This is a big number, meaning that the index could go through a valuation reset soon, especially now that some companies are slowing down.
Nasdaq 100 index chart by TradingView
Second, the index could go through mean reversion, where an asset moves back to the moving average. In this case, it could drop by about 8.7% to move to the 200-day Exponential Moving Average (EMA).
Finally, the index, just like the S&P 500 index, has formed a rising wedge pattern, a popular bearish sign. This pattern has more room to run before it gets to its confluence zone, meaning that the correction could happen in 2025 as Donald Trump restarts his trade war.
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