A recent debate among investors has sparked a divide between two popular ETFs that focus on high-quality companies. The iShares MSCI USA Quality Factor and Invesco’s S&P 500 Quality have significantly different performance after one of them dropped Nvidia, highlighting concerns about the stability of top tech firms in these funds.
The iShares MSCI USA Quality Factor tracks companies with strong financials, including high profitability and low leverage. However, by exiting Nvidia, which was a major holding, this ETF has seen its value decrease. In contrast, the Invesco S&P 500 Quality fund continues to hold most of the top Big Tech firms, leading some to question whether these companies are truly “quality” investments.
The debate centers around what it means for a company to be considered high-quality and how these definitions impact investor returns.
Source: https://www.wsj.com/finance/investing/why-nvidia-and-other-ai-stocks-have-lost-their-quality-status-84180ff2