QQQ Just Met Its Match With This New ETF. Here's Why It's a Win for Investors.

How iconic is the Invesco QQQ Trust Series 1 (QQQ)? I have two different answers. First, its ticker symbol is right in the name. Ever seen that before? Neither have I.

The other one: It has had its own line of TV commercials. That's big time, eh? But QQQ has had the Nasdaq 100 Index ($IUXX)-tracking business largely to itself, since it first debuted in 1999. That is changing, and quickly. 

On Monday, BlackRock filed a preliminary prospectus for a new Nasdaq 100 exchange-traded fund (ETF), set to trade under the ticker IQQ. This isn't just another fund launch; it is a direct assault on Invesco’s multi-decade fortress around the Nasdaq 100 Index, a space Invesco has dominated almost exclusively with QQQ, now with around $375 billion in assets under management. 

For investors, this is the financial equivalent of a heavyweight title fight. So, what is IQQ walking into the ring with?

QQQ trades at 32x trailing earnings, so it is not cheap, historically speaking. It is up about 84% the past three years. However, as we see in the table below, the five-year gain is 73%. Translation: It has been an uneven half-decade for QQQ.

The Nasdaq 100 is a top-heavy index, which has led to the creation of a top-heavy market, given its popularity. Here are the top holdings, filled with household names in technology, alongside a smattering of other sectors. 

QQQ’s long-term chart shows that it is certainly elevated. But it is not yet rolling over on a long-term basis.

Monopoly, Busted

For a long time, Invesco was the only manager licensed to offer a pure U.S.-listed ETF tracking the index. By breaking this exclusivity, the Nasdaq exchange is effectively democratizing its most famous benchmark. BlackRock, the world’s largest asset manager, doesn't enter markets to play second fiddle. They enter to dominate on scale and liquidity.

BlackRock isn't just launching a clone. It is launching a challenger designed for the current high-speed, high-liquidity environment. By using the ticker IQQ, BlackRock is signaling a product that will likely focus on institutional efficiency. While the original QQQ is a unit investment trust (UIT) — a somewhat clunky, older structure that cannot reinvest dividends or lend out securities as easily as modern ETFs — BlackRock’s IQQ will likely be a more flexible, modern vehicle.

Invesco’s QQQ carries an expense ratio of 0.20%, while its mini version, the Invesco Nasdaq 100 ETF (QQQM), sits at 0.15%. BlackRock is the king of the "low-cost core" in the form of its iShares Core series. The industry expectation is that BlackRock will price IQQ at a level that forces Invesco to choose between protecting its profit margins and defending its assets. 

If IQQ launches at 0.10% or lower, we could see a massive migration of capital as advisors and institutions swap out the expensive QQQ for the cheaper BlackRock alternative.

Why Now? Or, What Took So Long?

Why would Nasdaq allow BlackRock in now, after decades of loyalty to Invesco? As artificial intelligence (AI) and Big Tech face increasing volatility and energy-led margin pressure, the exchange needs the world's largest liquidity provider (BlackRock) to ensure the Nasdaq 100 remains the global standard for growth exposure.

For the tactical investor, the arrival of IQQ is a major win. It introduces competition to a sector that has been stagnant for years. But it also serves as a warning: When the two biggest titans in finance start fighting over the same basket of 100 stocks, it may mean we have reached peak concentration. And that could spell a market top, before long.

Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob's written research, check out ETFYourself.com.