A Tech Renaissance Could Offer Enticing Opportunities In Direxion's QQQU, QQQD ETFs

Late last month, JPMorgan analysts stated that with other global regions struggling with various challenges, the U.S. will likely remain the global growth leader. Much of this bold assertion centers on artificial intelligence.

As Benzinga recently reported, AI "is sparking a capital expenditure boom that dwarfs anything seen in decades." Specifically, the companies that comprise the Magnificent 7 – Amazon.com Inc. AMZN, Microsoft Corp MSFT, Meta Platforms Inc META, NVIDIA Corp NVDA, Alphabet Inc. GOOG, Tesla Inc TSLA and Apple Inc AAPL – plan to invest over $500 billion in capital expenditures and research and development next year.

If so, the collective investments will represent roughly 25% of these tech juggernauts' combined sales. Furthermore, JPMorgan estimates that the wider AI landscape could see total spending breach the $1 trillion mark by the end of the year. This tally includes costs for infrastructure, engineering specialists and data center management.

In addition, the individual names that make up the ranks of the Magnificent 7 have been commanding the spotlight. Earlier this week, Google Quantum AI founder and head Hartmut Neven revealed its latest quantum chip called Willow. Hailed as a major leap in computing technology, Willow can deliver blistering performance while exponentially reducing errors.

On the automotive front, German automaker BMW BMWYY remarked on social media that Tesla's latest version of its full self-driving (FSD) driver assistance software was "very impressive." Critically, Gary Black, Managing Partner at The Future Fund, noted the possibility that the electric vehicle manufacturer may license out its FSD tech to another automaker, echoing the sentiments of Tesla CEO Elon Musk.

The Direxion ETFs: Nevertheless, JPMorgan analysts warned that not everything about the Magnificent 7 is without concern. Notably, the experts stated that capital misallocation and lofty growth targets could invite investor skepticism by late next year. If so, the ability to extract returns from both positive and negative narratives forms the backbone of Direxion's innovation-focused exchange-traded funds.

The bulls may be attracted to the Direxion Daily Magnificent 7 Bull 2X Shares QQQU. Anchored heaviest to Tesla, QQQU seeks to deliver 200% of the performance of the Indxx Magnificent 7 Index. On the other end, bears may consider the Direxion Daily Magnificent 7 Bear 1X Shares QQQD, which seeks 100% of the inverse performance of the aforementioned index.

Fundamentally, the QQQU and QQQD offer convenient mechanisms for speculation. For one thing, tech's heavy hitters can be found under one roof. Second, investors can enjoy either leverage or a short position without resorting to options and their inherent complexities.

However, it's important to note that Direxion urges investors to not hold a position in either ETF for a period longer than one day. Doing so may result in value erosion due to the daily compounding of volatility.

The QQQU ETF: As expected, the QQQU 2x bull fund has been on a blistering ride since its market debut in March of this year, gaining 87%.

• At the moment, the leveraged ETF stands firmly above its 20-day exponential and 50-day (simple) moving averages, suggesting sustained momentum.
• Despite recent strong volume, QQQU printed a candlestick reminiscent of a "shooting star," which may suggest temporary overextension.

The QQQD ETF: On the other side of the tracks, the QQQD ETF has incurred a rough outing since its March debut, losing approximately 31% of its value.

• In a complete flipping of sentiment, the inverse fund sits well below its 20-day exponential moving average and 50 DMA, posing significant concerns.
• However, the bear ETF also appears to have printed a "hammer" candlestick, which possibly suggests a temporary reprieve in the downward trend.

Featured photo by Kohji Asakawa on Pixabay.