Market Analysis2025-11-10
U.S. Tech Stocks Rally Continues: AI Momentum and QQQ ETF Investment Strategy
U.S. technology stocks continue to rally on the back of AI innovation optimism. With the Nasdaq 100 index up 20% year-to-date, returns for QQQ ETF investors have significantly improved. It is a good time to review rebalancing opportunities and asset allocation strategy.
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Entering November 2025, the U.S. Nasdaq 100 index has risen 20% year-to-date, sustaining a broad technology stock rally. AI-related mega-caps such as NVIDIA, Microsoft, and Meta are leading the market on the back of strong earnings, driving meaningful gains for QQQ ETF investors. That said, portfolios where technology has grown to an outsized allocation may now face heightened volatility risk, making it an appropriate time to use a rebalancing calculator to review current weights. Investors should use an asset allocation calculator to assess the gap between target and current weights and determine the right time to make adjustments.
Key Drivers Behind the Nasdaq 100 Rally
The strength of the Nasdaq 100 reflects a combination of several reinforcing factors. First, explosive growth in AI semiconductor demand has pushed NVIDIA's market capitalization past $3 trillion. Ongoing data center expansion and the proliferation of generative AI services have kept GPU demand ahead of supply. Second, big-tech earnings have consistently beaten expectations. Microsoft reported Azure cloud revenue up 30% year-over-year, while Meta posted record quarterly net income driven by a recovery in advertising revenue. Third, expectations for Federal Reserve rate cuts continue to support growth-stock valuations. Markets are currently pricing in roughly a 25% probability of additional rate cuts in the first half of 2025, and the prospect of lower discount rates is driving multiple expansion in technology stocks. Fourth, earnings growth among technology companies remains strong. The projected 2025 EPS growth rate for Nasdaq 100 constituents stands at 15%, well ahead of the 10% forecast for the S&P 500.
QQQ ETF Performance and Portfolio Weighting
QQQ ETF has delivered a 20% year-to-date return, reflecting impressive performance. The top 10 holdings account for approximately 55% of total assets, with Apple, Microsoft, NVIDIA, Amazon, and Meta as the core positions. By sector, the fund is roughly 58% technology, 17% communication services, and 10% health care — a notably concentrated technology exposure. This is an important time to review portfolio weights. If an initial asset allocation was SPY 60%, QQQ 20%, and AGG 20%, QQQ's 20% gain may have pushed its actual weight to around 24%. A rebalancing calculator would show a deviation of approximately +4 percentage points relative to the target. If your rebalancing threshold is set at ±5 pp, an adjustment is not yet required; however, if the threshold is ±3 pp, it would be prudent to trim QQQ and reallocate proceeds to bonds or SPY. For leveraged products such as TQQQ, volatility is amplified threefold, making weight management even more critical. Exposure should be capped at 5% or less of the total portfolio, and the position should be approached with a short-term investment horizon.
Assessing Valuation Risk in Technology Stocks
As the technology rally extends, valuation concerns are mounting. The Nasdaq 100's P/E ratio currently stands at 28x, above its historical average of 25x. At the individual stock level, NVIDIA trades at 45x earnings, Tesla at 70x, and Amazon at 45x — all subject to debate over stretched valuations. The PEG ratio, which adjusts for growth, stands at approximately 1.8, still within a reasonable range. With an annual earnings growth rate of 15%, current valuations can arguably be justified. Key risk factors include: first, if interest rates remain higher than expected, rising discount rates could intensify valuation pressure. Second, if the timeline for monetizing AI investments is delayed, the market could see disappointment-driven selling. Big-tech companies are currently committing more than $200 billion per year to AI infrastructure, and if revenue growth falls short of expectations, a price correction would be difficult to avoid. Third, regulatory risk persists — tightening antitrust enforcement, escalating technology tensions with China, and data privacy regulations could all weigh on profitability. Investors should use a rebalancing calculator to simulate current returns and potential correction scenarios, and develop a response plan accordingly.
QQQ vs. SPY Comparison and Diversification Strategy
QQQ and SPY are both benchmark ETFs, but with distinctly different characteristics. QQQ tracks the Nasdaq 100 with approximately 58% in technology, has delivered an annualized return of roughly 18% over the past decade, carries annualized volatility of around 22%, and offers a dividend yield of just 0.5%. It tends to outperform during economic expansions and rate-cutting cycles. SPY tracks the S&P 500 and is more broadly diversified — approximately 30% technology, 13% financials, 12% health care, and other sectors. Its annualized return over the past decade is roughly 13%, with lower annualized volatility of around 18% and a dividend yield of 1.3%. It tends to deliver stable performance across the full economic cycle. For asset allocation, aggressive investors may consider QQQ 40%, SPY 30%, AGG 20%, and TLT 10% — increasing technology exposure while using bonds to moderate volatility. Balanced investors may prefer SPY 50%, QQQ 20%, AGG 20%, and IEF 10% — using SPY as the core and QQQ to add growth potential. Conservative investors should consider SPY 40%, SCHD 20%, AGG 30%, and TLT 10% — increasing dividend stock and bond exposure to prioritize stability. Investors should use a rebalancing calculator to measure the impact of quarterly weight adjustments and an asset allocation calculator to monitor risk levels, maintaining an optimal portfolio over time.
How to Use the Leveraged ETF TQQQ
TQQQ is a leveraged ETF that seeks to deliver 3x the daily return of the Nasdaq 100. When QQQ rises 1%, TQQQ gains approximately 3%; when QQQ falls 1%, TQQQ loses approximately 3%. Due to the compounding effect, TQQQ does not track exactly 3x over the long term — the greater the volatility, the more significant the volatility decay. Its expense ratio of 0.86% is higher than standard ETFs, with additional transaction costs from daily rebalancing. As a tactical strategy, TQQQ is best suited for short-term momentum trading. When a clear uptrend in technology stocks is in place, a 1-to-3-month short-term hold can be used to target elevated returns. Portfolio exposure should be capped at 5% or less of total assets to manage volatility risk. A clear stop-loss rule — for example, liquidating the position unconditionally on a 10% loss — is essential for risk management. Key risks include: losses are amplified threefold in a downturn, volatility decay causes losses to accumulate in sideways markets, and tracking error grows significantly over long holding periods due to compounding. When the Nasdaq fell 32% in 2022, TQQQ dropped 79%. TQQQ is a high-risk, high-return product that should only be used by experienced investors for short-term tactical allocation purposes, with strict risk management and daily monitoring of gains and losses using a rebalancing calculator.
Conclusion
With the technology stock rally showing no clear signs of abating, now is an appropriate time for QQQ ETF investors to review their portfolio weights. Use a rebalancing calculator to assess the deviation between current and target weights, and use an asset allocation calculator to evaluate overall risk levels and determine an appropriate time to make adjustments. Given the valuation burden on technology stocks and the inherent volatility risk, a diversification strategy that includes SPY and AGG is likely to improve long-term portfolio stability.
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