Animal Spirits Podcast – Talk Your Book: Investing in Next Gen Tech Stocks

Date: February 23, 2026
Hosts: Michael Batnick (B), Ben Carlson (A)
Guest: Paul Schroeder (D), Equity Product Strategist at Invesco

Episode Overview

This episode dives deep into the dynamics of "next generation" tech stocks, focusing specifically on the Invesco NASDAQ Next Gen 100 ETF (Ticker: QQQJ). Hosts Michael and Ben are joined by Paul Schroeder from Invesco to discuss mid-cap growth stocks ("the juniors"), sector diversification, the evolution of ETFs, and new themes in investor behavior, all against the backdrop of a shifting market away from mega-cap tech concentration.

Key Discussion Points & Insights

1. State of the Markets: Shift from Mega-Cap Dominance to Broader Participation

• In recent years, market returns were dominated by a handful of mega-cap tech stocks (“the Mag 7”); now, there is a renewed interest and outperformance from mid-cap and small-cap stocks.
  • Quote (Michael, 01:01): “There was one year in particular, I do think it was 23, where the S&P was up whatever it was, and X the mag was basically flat … the Mag 7 was up, 20% of the 493 were flat... And this year... the spread between the equal weight and the cap weighted S and P has never been this large.”
• The QQQJ ("Juniors") has outperformed QQQ (“the Qs”) year-to-date, signaling this broadening.
  • Quote (Ben, 01:50): “...the next gen, the triple Q’s with a J on the end is up almost 6% and the Qs themselves are just about flat on the year.”

2. Introduction to the NASDAQ ‘Juniors’ (QQQJ)

• QQQJ covers stocks 101-200 (by market cap) non-financial NASDAQ companies, bridging mid-cap exposure.
  • Quote (Paul, 03:33): “We launched it back in 2020 to really extend out what QQQ really provides... you're looking at stocks 101 through 200 non-financial companies listed on the NASDAQ Stock exchange... It tracks the NASDAQ Next Gen 100 index.”
• QQQJ is designed as a growth-oriented, mid-cap fund: “a good way to diversify against your large-cap exposure.” (Paul, 05:25)
• Graduations: About 4-7 companies per year move up from QQQJ into the QQQ as they grow in market cap.
  • Quote (Paul, 05:54): “When they both change holdings, you generally tend to see about five to seven holdings move up from QQQJ and go into the Qs.”

3. Holdings & Sector Diversification

• Common misconception is that NASDAQ indices are all tech, but QQQJ is notably diversified.
  • Holdings mentioned: SanDisk (largest, $89B market cap), eBay, United Airlines, Ulta Beauty, CoreWeave.
    • Ben (07:04): “There’s United Airlines. Ulta Beauty is one that sticks out to me because I have daughters who are really interested into skincare these days.”
  • Tech weighting for QQQJ is about half the QQQ (30-32% vs 60%), with significant allocations to consumer discretionary, healthcare, and industrials.
    • Paul (07:42): “The tech exposure is half of that of the Qs—around 30, 32%... you get different exposure within semis, within software … along with other components within the tech sector.”

4. Changing Conversations Around Diversification

• Advisors at Invesco now field more questions about diversification and mid-cap exposure as “Mag 7 fatigue” sets in.
  • Paul (09:35): “We’ve been having that conversation around diversification, concentration, risk... it almost felt forced, right, because everyone was so focused on Mag7 ...What we’ve seen over the past 12 months is a broadening out is very welcomed.”
• The flows are reflecting investor interest in diversification: more money is moving into equal-weight, quality, value, and momentum funds.
  • Paul (12:15): “It [momentum fund SPMO] went from being about a billion dollar fund, about a $9 billion fund. Right, just like that.”
  • Equal-weight strategies are gaining popularity amid skepticism about the sustainability of mega-cap growth.
  • Paul (12:44): “We started to see more flow come back into equal weight. We started to see more flow come back into quality…”

5. Equal-Weight Sector ETFs & Risk Appetite

• Invesco's equal-weight sector ETFs (unique offering) help neutralize concentration risk in sectors heavily weighted towards a few dominant players (e.g., Tesla, Amazon in discretionary).
  • Michael (13:13): “When I look at the equal weight basket, that gives me a really good indication of where the market is in terms of like a risk on, risk off type of environment.”
  • Paul (14:21): “We’re the only shop in town that equal weights those sectors... not only do you need to get your sector right, but you also have to assume that there’s going to be broad participation within that sector.”

6. Innovation in ETFs: Options and Income Strategies

• Investors, especially retirees, are increasingly drawn to covered-call and option-based ETFs for added yield and income.
  • Ben (15:39): “One of the areas that we've talked that is really seems to be on investors radars...is anything with options.”
  • Paul (17:49): “Income is such a large concern of people who are retired. Right. …They're looking for something that might not only provide a steady stream of income, but also have a component to it that has some capital appreciation.”
  • “Boomer candy”—term for these popular, high-income ETFs.

7. Thematic Diversification & Patent Analytics

• QQQJ’s healthcare exposure is highlighted by tracking company patent filings, especially in areas like bioinformatics and biotech, for future-facing portfolio allocation.
  • Paul (19:08): “Where we see the most patent activity within QQQJ over the past 12 months has been bioinformatics. Right. Which definitely falls within pharmaceuticals, that biotech sub industry.”

8. Expanding ETF Universe: Low Vol, Active, and More

• Invesco now offers products for various investor priorities: low volatility (QQLV), most income (QQQA), large-cap focus (QQBIG), etc.
  • Paul (20:53): “You do tend to see some staples pop in there, along with some industrials as well...it makes a lot of sense.”

9. ETF Innovation: Where Next?

• Next big leap: continued growth of active ETFs and further innovation in option-based income products.
  • Paul (23:37): “I still think the active ETF phase is at the very beginning...I would imagine we're going to continue to be active with that as we have a lot of really good active strategies...”

Notable Quotes & Memorable Moments

• On the Mag 7:
  • Michael (01:01): “Sorry, we're. We're doing this talk again... We're talking about the Mag 7 because that's all there was to talk about.”
• On the broadening out:
  • Paul (09:35): “What we've seen over the past 12 months is a broadening out is very welcomed, at least within Invesco and I think probably other asset managers as well.”
• On ‘boomer candy’:
  • Paul (17:49): “Eric Balchunas...has coined that or I've heard him use that term quite a bit. You know, income is such a large concern of people who are retired...”
• Muscle Memory for Tickers:
  • Michael (21:54): “Paul, how long did it take you to just boom, boom, boom, all these tickers? That's impressive.”
  • Paul (22:01): “...it's like muscle memory. You know, it's similar with even individual investors or FAs with stock, you know, AAPL, AVGO, NVDA. You know, it's just something that sticks. It takes time though, takes practice.”

Important Timestamps

• 00:48 – 03:10: Framing the episode and introduction to QQQJ (“the juniors”)
• 03:33 – 05:39: What is QQQJ, purpose, and mid-cap focus
• 07:04 – 08:29: Diversification in QQQJ – sector weights and holdings
• 09:35 – 11:31: Investor conversations shifting toward diversification
• 12:15 – 13:13: Flows into equal weight, quality, and momentum
• 13:13 – 15:39: Equal-weight sector ETFs and investor usage
• 15:39 – 18:54: Trends in options-based and income ETFs (“boomer candy”)
• 19:08 – 20:37: Sector and patent-driven themes within QQQJ
• 20:37 – 21:54: Product suite evolution: low vol, income, growth focus
• 23:12 – 23:37: Future of ETF innovation—active and option-based strategies

Takeaways

• The investing landscape is changing, with more appetite for diversification beyond mega-cap tech.
• QQQJ is positioned as a mid-cap growth ETF with broad sector and thematic diversification, relevant for investors who want to capture “what’s next” beyond the current tech giants.
• Innovation in ETFs continues to accelerate, with active management, options overlay, and low-volatility strategies growing in prominence.
• Flows and investor conversations suggest the market is embracing broader, more resilient investment approaches after years of concentration risk.

Resources

• Invesco NASDAQ Next Gen 100 ETF (QQQJ): https://www.invesco.com/qqqj
• Contact the hosts: animalspirits@compoundnews.com

Summary faithfully reflects the episode’s content and character, with timestamps and attributions for clarity.