The Invesco QQQ ETF, which tracks the Nasdaq 100 index, has crashed this year and moved into a correction after falling by over 12.8% from its highest level this year. It plunged to a low of $471, its lowest level since September last year. This article explores the two main reasons why the QQQ ETF has slumped and the top stocks leading the sell-off.
Why the Nasdaq 100 index has crashed
The Nasdaq 100 index has plunged this year as investors react to the ongoing trade war between the US, Canada, Mexico, and China. He has added at least 25% tariffs on each of these countries, a move that will reshape corporate America for a long time. These tariffs will lead to higher costs of doing business and weaker demand.
The Nasdaq 100 index has dropped as concerns that the AI bubble has started to burst. Most AI stocks, including popular names like NVIDIA, AMD, and SoundHound have all plunged by double digits in the past few weeks. That could be a sign that the AI industry may be starting to weaken, a move that will disrupt one of the top themes in the market.
Further, the QQQ ETF has dropped as Wall Street analysts turned negative on US equities. Citigroup analysts downgraded US stocks and recommended that investors look to Asia, where stocks are doing well. The Hang Seng Tech Index, which is seen as China’s equivalent to the Nasdaq 100 index, has surged this year.
HSBC has also downgraded US equities and recommended European ones. Popular European indices like FTSE MIB, FTSE 100, and the DAX index have all jumped this year.
The QQQ ETF has also crashed because of its weak technicals. It formed a double-top pattern at $540, and has now dropped below its neckline at $500. The depth of this double-top pattern was 7.25%. Measuring the distance from the neckline at $500 means that the fund may drop to $463 and then resume its climb.
QQQ ETF stock chart by TradingView
Top stocks dragging the QQQ ETF
Many technology companies in the QQQ ETF are lagging this year. The top laggard is The Trade Desk, whose stock price has crashed by over 50% this year. This decline has erased some of the gains made last year.
The Trade Desk has crashed simply because, like AppLovin, it jumped sharply so quick in 2024. Historically, such parabolic moves often lead to a big decline over time.
Tesla stock price has plunged by 41% this year as the company has faced substantial challenges. Its sales in Europe are plummeting, dealers are being attacked in the US, and there are concerns about Elon Musk’s involvement in the Department of Government Efficiency (DOGE).
Marvell Technology stock price is down by 39%, as I warned would happen. My argument was that the semiconductor company had become severely overvalued after inking deals with companies like Amazon and Microsoft.
ON Semiconductor share price has crashed by 38% because of the potential slowdown in the AI industry. AppLovin stock has plummeted by 22% because of valuation and short-seller report concerns.
The other top companies dragging the QQQ ETF this year are AMD, PayPal, NVIDIA, Broadcom, MongoDB, Lululemon Athletica, and Autodesk.
On the other hand, the best-performing Nasdaq 100 index companies are Gilead Sciences, PDD Holdings, Amgen, Vertex Pharmaceuticals, MercadoLibre, and T-Mobile. These healthcare companies will be less affected by the ongoing trade war. Other notable gainers are Take-Two Interactive, DoorDash, and Mondelez.
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