The Nasdaq-100: A Most Ingenious Speculation

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The Nasdaq-100, after a period of exuberance that bordered on the indecent, finds itself, shall we say, resting. Three years of gains, one might observe, are enough to satisfy even the most grasping of investors. To expect such fortune to continue indefinitely is, of course, to misunderstand the very nature of speculation. The market, dear reader, is rarely grateful for sustained success; it prefers a little drama, a touch of delightful uncertainty.

Concerns regarding the disruptive potential of artificial intelligence – as if progress were ever entirely benign – and the rather vulgar subject of valuations have conspired to transform this erstwhile leader into a mere follower. It hasn’t exactly fallen, mind you, but it lacks the impudent energy of its recent past. A pause, one might say, for breath and a little self-reflection.

Recently, however, a glimmer of the old spirit has returned. From the 27th of February – the day before the latest geopolitical distraction began – to the 9th of March, the Invesco QQQ ETF, a rather pedestrian vehicle for tracking the Nasdaq-100, outperformed the Vanguard S&P 500 ETF. A small victory, perhaps, but a victory nonetheless. It proves, if proof were needed, that even a temporarily subdued beast can still exhibit a flash of its former brilliance.

One should resist the temptation to draw grand conclusions from a few days’ trading. After all, the market is a fickle mistress, prone to sudden whims and irrational affections. But it is worth considering whether the recent rally has run its course, or whether there is still potential for further, shall we say, enrichment.

The Persistence of Progress

The investments made in artificial intelligence, so fashionable of late, have yielded results for the “Magnificent Seven” – a rather grandiose title, don’t you think? – in 2025. Both earnings and revenues have accelerated, despite the persistent doubts about the ultimate worth of such expenditure. To spend lavishly on innovation is, after all, a perfectly respectable vice.

And this, it seems, is not a fleeting phenomenon. The technology sector is projected to deliver the greatest earnings and revenue growth of all the S&P 500 sectors in 2026. Even in 2027, when growth is expected to moderate to a mere 20%, the sector is forecast to remain the leader in revenue expansion. Over the long term, earnings growth is, naturally, the most reliable driver of stock performance, although, as anyone with experience knows, anything can happen in the short term. Provided, of course, that these billions poured into AI do not prove to be a complete and utter waste.

The Allure of the Artificial

A Matter of Perspective

U.S. stock valuations are higher than their historical averages. This is undeniable. But they are not, thankfully, entirely outrageous. The forward price-to-earnings ratio for the S&P 500 information technology sector is currently 24.2. Above the long-term average, certainly, but a far cry from the excesses of the recent past. It is, in short, not nearly as expensive as it was a mere year ago.

Considering this figure in relation to expected earnings growth, the valuation of this sector – and the Nasdaq-100 – is not entirely unreasonable. If these companies deliver on their promises, a major valuation contraction may not be necessary. One should always remember that optimism, while occasionally misplaced, is a far more agreeable companion than despair.

Nasdaq-100 vs. S&P 500: A Delicate Balance

If your investment horizon extends a decade or more, I believe the Nasdaq-100 is the superior choice. However, given the recent, rather relentless, rise in tech stock prices, a brief pause for breath is not improbable. In that sense, the S&P 500 might offer a more prudent short-term play, particularly given the gains being made in other sectors. But ultimately, a technology index will prevail in the long run.

For exposure to the Nasdaq-100, I would recommend the Invesco Nasdaq-100 ETF (QQQM) rather than its more popular cousin. It tracks the same index but with a lower expense ratio of 0.15% compared to QQQ’s 0.18%. A small advantage, perhaps, but one should always seize any opportunity to accumulate wealth, however modest.

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2026-03-10 07:23