After logging in the biggest monthly gain in November, Wall Street continued its hot streak at the start of December. The Nasdaq Composite Index touched a new all-time high and achieved its 34th record closing high of the year. The tech-heavy index is up about 30% this year, outperforming the other indices.

Invesco QQQ QQQ, which serves as a proxy to the Nasdaq Index, has gained 26.4% in the year-to-date timeframe. We have highlighted the five best-performing stocks of QQQ this year that led the way higher in the portfolio. These are AppLovin Corporation APP, NVIDIA Corporation NVDA, Constellation Energy Corporation CEG, Arm Holdings Limited ARM and Netflix NFLX.

Surging technology stocks, the ongoing AI boom and Fed rate cuts drove the gains and will likely continue to do so. A few “Magnificent Seven” stocks in particular — NVIDIA (NVDA), Apple (AAPL) and Microsoft (MSFT) — are flying high, with the trio accounting for about a fifth of Nasdaq's weight (read: 5 Best Top-Ranked ETFs of November With More Upside Potential).

The AI boom is fueling the rally in the sector, with companies investing considerable sums in this technology. The expansion of AI applications holds the promise of ushering in fresh growth opportunities in the tech sector and beyond. The generative AI market is poised to explode at a CAGR of 42% to $1.3 trillion over the next 10 years from a market size of just $40 billion in 2022, according to a new report by Bloomberg Intelligence (BI). 

Further, the prospect of a lower interest rate bodes well for the stocks in December. Lower interest rates generally lead to reduced borrowing costs that help businesses expand their operations more easily and increase profitability. This, in turn, stimulates economic growth and provides a boost to the stock market. According to CME Group's FedWatch Tool, markets currently see a 65.4% chance of a 25-bps rate cut in December. Federal Reserve Chair Jerome Powell slashed interest rates two times over the past two months, bringing down the benchmark rate to 4.5%-4.75%. 

Let’s take a closer look at the fundamentals of QQQ.

QQQ in Focus

Invesco QQQ offers exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq. Invesco QQQ is one of the largest and most popular ETFs in the large-cap space, with an AUM of $313.8 billion and an average daily volume of around 25 million shares. Invesco QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Nasdaq ETF Hits New 52-Week High). 

Below, we have highlighted the abovementioned five stocks in the ETF with their respective positions in the fund’s basket.

Top-Performing Stocks in QQQ

AppLovin provides a technology platform that enables developers to market, monetize, analyze and publish their apps. The stock has skyrocketed 820% so far this year and makes up for 0.6% of the assets in the QQQ portfolio. Applovin has an expected earnings growth rate of 314.3% for this year. It has a Zacks Rank #1 (Strong Buy) and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. The stock has jumped 183.2% this year and its earnings are expected to grow 125.4% this fiscal year (ending January 2025). NVIDIA makes up for 8.17% of the assets in QQQ and has a Zacks Rank #2 (Buy). It has a Growth Score of A. 

Constellation Energy provides electric power, natural gas and energy management services to 2 million customers across the continental United States. The stock has soared 111.7% so far this year. It makes up 0.5% of the assets in the QQQ portfolio. Constellation Energy has an expected earnings growth rate of 62.5% for this year and a Zacks Rank #3. 

Arm Holdings provides processor designs and software platforms. The stock makes up for 0.11% of the assets in the QQQ portfolio. Arm Holdings has risen 86.8% so far this year and has an expected earnings growth rate of 22% for the fiscal year (ending March 2025). It has a Zacks Rank #3.

Netflix is considered a pioneer in the streaming space. The company evolved from a small DVD rental provider to a dominant streaming service provider, courtesy of its wide-ranging content portfolio and a fortified international footprint. The stock has jumped about 85% in 2024 and accounts for a 2.39% share in the QQQ portfolio. Netflix has an estimated earnings growth rate of 64.4% for this year and a Zacks Rank #3.

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Constellation Energy Corporation (CEG) : Free Stock Analysis Report

Netflix, Inc. (NFLX) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

ARM Holdings PLC Sponsored ADR (ARM) : Free Stock Analysis Report

Invesco QQQ (QQQ): ETF Research Reports

AppLovin Corporation (APP) : Free Stock Analysis Report

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