Nasdaq Market Correction: Grab the Growth QQQ ETF While Stocks Crash

The tech-heavy Nasdaq 100 has taken a far bigger hit than the S&P 500 amid the Trump tariff-inspired plunge. While the S&P 500 has narrowly avoided falling into a bear market (defined as a 20% decline from its peak), the Nasdaq 100 has been stuck in one and could prove more vulnerable in the face of a rapidly escalating bilateral trade war between the U.S. and China.

Things escalated rather quickly, with tariffs on Chinese imports soaring as high as 145% after some back-and-forth. The tit-for-tat trade war between the two economic superpowers has largely reached its peak, with China stating that it will not respond to further increases in levies that are already high enough to significantly reduce trade between the two nations. Non-tariff measures could be next, and they could add even more heat to the trade war and pain for citizens of both countries.

Is there any room for optimism amid profound pessimism?

At the same time, a de-escalation could happen as quickly as the escalation in tariffs. I find the words of U.S. Treasury Secretary Scott Bessent to be quite encouraging.

Reportedly, Bessent sees the potential for “de-escalation” ahead. Combined with the headline that Trump isn’t looking to fire Fed Chair Jerome Powell, the sigh of relief from investors is almost palpable. Time will tell if the latest sessions of relief gains are sustainable. In any case, it’s the tech sector that stands to gain the most if we’re to hear of more constructive headlines regarding U.S.-China trade.

Though, it’s difficult to know for certain when the trade war will wind down and a new trade deal can be inked in what will mark a win for both sides, I think it’s safe to say that tech stocks, especially those Magnificent Seven tech titans with considerable China exposure — think Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA) — could have the most room to gain if we’re dealt some good news on developments regarding U.S.-China trade for a change.

A de-escalation in the US-China trade war could be a big win for tech and the Nasdaq 100

Though tech stocks and the Nasdaq 100 seem less investable than the S&P 500 or international markets, which have held up better amid the Trump correction, I see the innovation-heavy index as having more upside potential to compensate for its elevated risks.

And while there have been considerable outflows from top Nasdaq ETFs, such as the Invesco QQQ Trust (NASDAQ:QQQ), perhaps young, growth-minded investors who are still heavily invested in the AI trade may wish to buy, as most others sell. Of course, it’s going to be a rougher ride, but, in my humble opinion, it could be worth hopping aboard while others turn against the tech-heavy index that’s steadily outperformed the S&P 500 over most long-term time periods.

And while it remains to be seen whether the 2025 Nasdaq correction is the start of something that resembles the dot-com bust of 2000 (it took a decade and a half to recover from that horrific crash), I still think valuations on some of the top QQQ holdings are nowhere near bubble territory. Arguably, after the latest plunge in the Nasdaq 100, many of its top constituents now look incredibly cheap, at least in my view.

As it stands, the QQQ is down nearly 18% from its all-time high, hit earlier this year, after falling as low as 23% from peak to trough. Undoubtedly, the Nasdaq 100 will be far too risky for many (think retirees who are already down more than 15%) to buy on the way down, especially as the Magnificent Seven continue to falter, either due to deteriorating U.S.-China trade relations or their amplified vulnerability in the face of a significant economic recession.

The bottom line

As they say, higher risk often means higher reward. It’ll be tougher to justify braving the Nasdaq 100 meltdown as an increasing number of investors give up on the Magnificent Seven (including Jim Cramer, who recently stated the group is no longer deserving of its “magnificent” title) and AI enthusiasm fades.

That said, I believe compressed valuations and ongoing AI tailwinds are more of a reason to get in than out, at least for those with a strong stomach and a lengthy time horizon. Of course, prudent investors may wish to spread their buying of at-risk ETFs like the QQQ over time. Things can certainly get worse from here before they improve markedly.

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