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The tech-heavy Nasdaq Composite Index wrapped up its best quarter since 2020, climbing 16.8%. The massive rally was brought in by Silicon Valley Bank’s collapse earlier in March, leading to worries about monetary tightening conditions.

Invesco QQQ (QQQ - Free Report), which serves as a proxy to the Nasdaq Index, gained 18.7%. The ETF is powered by investors’ flight to mega-cap, cash-rich technology stocks amid the latest bank turbulence. As such, a few tech names were the real stars, having gained more than 50% in the quarter. These include NVIDIA Corporation (NVDA - Free Report), Meta Platforms (META - Free Report), Tesla (TSLA - Free Report), Warner Bros. Discovery (WBD - Free Report), and Align Technology (ALGN - Free Report).

The mega-cap tech stocks saw more than $600 billion in a combined rally last month. These have strong balance sheets, durable revenue streams, and robust profit margins, and are, thus, better positioned to withstand a possible economic downturn. These are also set to benefit from a steep drop in bond yields.

Further, the tech stocks received a boost from the rising risk of a recession, heightened by the recent bank crisis that may prompt the Federal Reserve to stop raising interest rates sooner than expected. The Fed raised interest rates by 25 bps in the latest FOMC meeting but signaled that an end to interest rate increases could be on the horizon.

As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low. Signs of cooling inflation also bolstered hopes that the Fed might soon end its aggressive interest rate hikes.

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

QQQ in Focus

Invesco QQQ provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq. Information technology accounts for 50% of the assets, while communication services and consumer discretionary make up for a 16.3% and 15% share, respectively.

Invesco QQQ is one of the largest and most popular ETFs in the large-cap space, with AUM of $168.1 billion and an average daily volume of around 56.2 million shares. Invesco QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

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

Top-Performing Stocks in QQQ

NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. The stock jumped 90% in the first quarter and its earnings are expected to grow 34.1% for the fiscal year (ending January 2024).

NVIDIA makes up for 5.2% of assets in QQQ and has a Zacks Rank #2.

Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app owing to acquisitions. The stock climbed 76% and accounts for 3.6% in the fund’s basket.

Meta Platforms has an expected earnings growth rate of 3.97% for this year. It has a Zacks Rank #1 (Strong Buy).

Tesla is the market leader in battery-powered electric car sales in the United States, with a roughly 70% market share. The stock makes up for 3.9% of assets in the QQQ portfolio.

Tesla gained 68.4% last quarter and has an expected earnings growth rate of 32.7% for next year. It has a Zacks Rank #4.

Warner Bros. Discovery is a media and entertainment company, which creates and distributes a portfolio of content and brands across television, film and streaming. The company's brands and products include Discovery Channel, discovery, CNN, CNN, DC, Eurosport, HBO, HBO Max, HGTV, Food Network, Investigation Discovery, TLC, TNT, TBS, truTV, Travel Channel, MotorTrend, Animal Planet, Science Channel, Warner Bros. Pictures, New Line Cinema, Cartoon Network, Adult Swim, Turner Classic Movies and others.

The stock gained 59.3% last quarter and accounts for 0.28% in the fund’s basket. Warner Bros. Discovery is expected to see an earnings growth of 06.5% for this year. It has a Zacks Rank #2 and a Growth Score of A.

Align Technology manufactures and markets a system of clear aligner therapy, intra-oral scanners and CAD/CAM (computer-aided design and computer-aided manufacturing) digital services used in dentistry, orthodontics, and dental records storage. The stock was up 58.4% last quarter.

Align Technology has an estimated earnings growth rate of 0.20% for this year. It accounts for a 0.21% share in QQQ and has a Zacks ETF Rank #3.

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