Prediction: This Growth ETF Will Triple Over the Next 10 Years. Here’s the Math.

The Invesco QQQ Trust (QQQ 1.55%) is one of the most popular exchange-traded funds (ETFs). It’s currently the fifth-largest ETF by assets under management at $476 billion and the second-most traded ETF by volume. The driving factor of the fund’s popularity is its returns. It ranks in the top 1% of large-cap growth funds over the last 15 years.

This top ETF has more than doubled over the past five years. I predict it could triple in value over the next decade. Here’s the math and the thesis driving my bullish view.

Image source: Getty Images.

Tracking the top growth stocks

The Invesco QQQ Trust tracks the performance of the Nasdaq-100 index, a stock market index composed of the 100 largest non-financial companies listed on the Nasdaq stock exchange. The Nasdaq has been a magnet for fast-growing companies. As a result, this index is a good proxy for large-cap growth stocks. Its top 10 holdings include tech giants Nvidia, Amazon, and Alphabet.

These technology titans have delivered robust returns over the years by capitalizing on megatrends such as cloud computing, streaming, AI, and e-commerce. Over the last five years, the “Magnificent Seven” stocks, seven of the largest tech-focused growth companies, have delivered an average return of nearly 130%, more than double the return of the rest of the S&P 500 (less than 60%). They’ve helped drive the QQQ’s returns. The ETF has delivered a 13.3% annualized return over the last five years and an even more robust 19% annualized return over the past decade.

Today’s Change

(-1.55%) $-11.12

Current Price

$706.62

Key Data Points

AUM

$477B

Dividend Yield

0.43%

Expense Ratio

0.18%

Top Holdings

NVDA

8.11%

AAPL

7.32%

MU

4.84%

Here’s how the QQQ can triple over the next decade

There’s a simple mathematical rule investors use to determine the number of years needed to triple an investment: Rule of 115. If you divide 115 by the rate of return, it will show you the number of years it would take to triple your investment at that rate. Here are the years to triple at various rates of return:

Data by the author.

As that table shows, you’d need an annualized return between 11% and 12% triple your money in a decade (around 11.6%). While QQQ’s past performance doesn’t guarantee it will deliver similarly strong returns in the future, it certainly suggests the fund has the growth to produce a return at or above that level.

I think an annualized return of more than 11.5% is likely conservative due to the multi-year, multi-trillion-dollar AI investment cycle. McKinsey estimates that companies will invest $5.2 trillion in data centers equipped to handle AI workloads through 2030 alone. Meanwhile, they’ll spend another $1.5 trillion in capital to support non-AI workloads. This massive investment cycle will drive growing demand for chips by companies like Nvidia and robust cloud services growth for hyperscalers like Amazon and Alphabet. That should drive strong revenue and earnings growth for the tech sector over the next 10 years.

This ETF could easily triple in 10 years

There is no sure thing in investing. However, it wouldn’t be hard for the QQQ to triple over the next decade. The roughly 11.5% annualized return needed to achieve that outcome is a low bar, given the coming massive AI investment cycle we’re entering.