A fresh opportunity is emerging in the world of artificial intelligence (AI) as quantum computing stocks gain traction. Companies like IonQ, Rigetti Computing, and Quantum Computing have caught the eyes of investors recently.

When a new trend becomes popular, it’s easy to want to jump in and follow the crowd. Yet, this approach can resemble the Greater Fool Theory, where investors hope to sell their shares to someone who might overpay for them.

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Notably, the companies mentioned were penny stocks for most of last year and only began gaining momentum as quantum computing discussions rose among AI advocates.

If you’re exploring investments in this area, consider opting for a diversified platform like an exchange-traded fund (ETF). In this article, I will delve into the Defiance Quantum ETF (NASDAQ: QTUM) and why it may be a wiser choice than some of the speculative stocks mentioned earlier.

Why Choose the Defiance Quantum ETF?

ETFs can be beneficial for investors who prefer not to actively manage their investments. They provide a way to tap into specific sectors even without knowing exactly which stocks to pick.

The Defiance Quantum ETF focuses primarily on themes surrounding AI and quantum computing.

According to the latest data, the ETF includes leading AI stocks such as Palantir Technologies, Nvidia, and Taiwan Semiconductor Manufacturing. It also features defense giants like Northrop Grumman and Lockheed Martin, as well as companies engaged in quantum research, including Alphabet and IBM. Additionally, there are positions in smaller, riskier stocks like Rigetti, IonQ, and D-Wave Quantum.

Despite some holdings in more vulnerable small-cap companies, investing in the Defiance Quantum ETF offers solid exposure to quantum computing alongside semiconductors, enterprise software, and defense. This array of stocks provides a buffer against the volatility that individual stocks may experience.

Image source: Getty Images.

Current Valuation of the Defiance Quantum ETF

Examining the price trajectory of the Defiance Quantum ETF over the past year can provide insights into its performance.

QTUM data by YCharts

Throughout much of 2024, the ETF enjoyed stable gains, coinciding with AI’s continued influence on the stock market.

Recently, however, the ETF has seen significant valuation growth. This recent uptick aligns with the surge experienced by many stocks highlighted in this analysis.

Currently, the Defiance Quantum ETF is trading just below its 52-week high. While there seems to be positive momentum keeping its price high, investors might not need to be overly concerned. The portfolio managers are expected to maintain their core holdings without major changes.

Many stocks in the Defiance Quantum ETF are recognized leaders in the AI sphere, positioning quantum computing as an additional opportunity. For this reason, investing in the Defiance Quantum ETF is generally preferable to putting money into single quantum-focused stocks.

A strategic approach when investing in the Defiance Quantum ETF is to utilize dollar-cost averaging over a long-term period. This strategy allows you to gradually increase your stake in a growing market while ensuring ample diversification, minimizing risks associated with any single company depending on market fluctuations.

Is Now the Right Time to Invest $1,000 in the Defiance Quantum ETF?

Before making any decisions about buying shares in the Defiance Quantum ETF, it’s essential to consider the following:

The Motley Fool Stock Advisor analyst team recently pinpointed their top 10 best stocks for investors to buy right now, and notably, the Defiance Quantum ETF did not make the list. The selected stocks may offer considerable returns in the years ahead.

Take Nvidia, for example—when it appeared on this list on April 15, 2005, an investment of $1,000 then would now be worth $885,388!*

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco holds positions in Alphabet, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Nvidia, Palantir Technologies, and Taiwan Semiconductor Manufacturing. The Motley Fool also recommends International Business Machines and Lockheed Martin. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.