The Investment Case for Leveraged Tech, This Decade’s Bitcoin

The dominance of big tech is, IMHO, one of the biggest investment opportunities and new economic paradigms in history, or at least going back to the industrial revolution. An increasingly large share of global economic activity, such as cloud, AI, apps, mobile, ads, etc. is being funneled through maybe a couple dozen huge companies.

Although big tech companies have always existed, like IBM, Cisco, or Bell Labs, this is on another level. We’re talking not just companies as in supplying end-goods to customers, but quasi-sovereign entities which have embed themselves into the infrastructure or fabric of the economy or society itself such as logistics, cloud, delivery, etc. The presence of these companies in the economy is felt and seen almost everywhere, such as Amazon delivery trucks or Uber drivers.

The closest historical parallels would be the Mississippi and South Sea Companies, which in present day dollars were worth trillions of dollars too. This is probably the closest thing to the ‘e-acc movement’ on Twitter. When people ask “when will the acceleration happen,” or “what will it look like,” it’s this and now.

Anyone can participate in this revolution (or evolution, depending on how you look at it). Who would have guessed that one could achieve returns comparable to the greatest hedge fund managers ever, even comparable to Renaissance Technologies [0] or Warren Buffett, by merely investing in the biggest and most dominant and visible of tech companies, and then adding leverage, hence “leveraged tech”.

And since we’re talking leveraged tech index funds, like TQQQ or QLD, which are the 3x and 2x leveraged equivalents respectfully of the Nasdaq 100 index, this mitigates most of the risks of picking and choosing individual stocks [1]. It also mitigates the risks and costs of inflated borrowing fees and path dependency of taking on margin debt [2].

So how good has the performance been? Below is the chart of QLD (the 2x version of the Nasdaq 100) including dividends, up 41x since 2006, compared to the SPY (which tracks the S&P 500), including dividends, up 5.5x:

Notably this includes the 2007-2009 financial crisis, in which QLD recovered. The 3x version, TQQQ, has even more gains, but 1.5-2x leverage is generally regarded as the optimal leverage over many decades and multiple bear markets, including the severe bear market 2000-2003.

If there is a repeat of the 2010-2021 or the ’80s or ’90s, TECL and TQQQ could conceivably go up 50-200x. Assuming 2022 was the bottom of the last cycle, then TQQQ/TECL could go up an additional 50x from the present price (it already tripled) until peaking at 2032 or so. Just as Bitcoin was the best investment of the 2010-2020, for this decade it’s leveraged tech. But unlike Bitcoin, tech companies generate actual profits and earnings and are fully integrated into the economy instead of being merely a curiosity. [3]

The dotcom bubble and crash, like the crash of 1929-1933, was likely a once in a century event. It will not be repeated in our lifetimes. PE ratios in 1999 were 100+ for the Nasdaq 100, which indicated a grotesquely overvalued market due to overoptimism:

(Yes it only goes to 2014 but I am not going to pay for a ‘data subscription plan’ to generate a chart I will only use once.)

Amazingly, despite the recent gains, the current PE ratio of the Nasdaq 100 is just 25, which is 10% lower than the historical average, making the market undervalued thanks in large part to record high profits.

Same for the 2008 financial crisis: another once in a lifetime event. The last major financial crisis of even a remotely similar magnitude was in 1929, so about 80 years apart. Or Covid: the last major pandemic was 100 years ago, the Spanish Flu. Or Black Monday, in 1987: that too was likely a once in a century or half-century event (yes, there is not much data to draw conclusions with a high statistical confidence, but it’s reasonable to assume it’s very rare, in the order of many decades apart). Or the inflation surge of 2022; the last time this happened was 40 years ago in 1981.

So if you are selling for fear of another major crisis, you’re betting that there will be another once-in-century event. Odds are the market will keep drifting higher for the next decade without any crisis, or minor speed bumps like the occasional banking hiccup like in early 2023.

People tend to remember the crisis, but forget the long uneventful stretches, like from 2010-2020 or 1988-1998, in which the market keeps gently rising to no end. If you were on the sidelines, you missed out on all of that. So now you need another crisis just to have the opportunity to buy back in. Good luck with that. You may be waiting 50-80 years.

Even during the Covid crash, TQQQ never got lower than 2017 levels. Same for the crash of 2022 due to inflation fears, which retraced 5 years’ worth of gains.

Even a 70% decline, like in 2022, is survivable as the 2023-2024 rebound has shown.

[Disclaimer: Of course, if you cannot handle losing 3/4 or more of your capital, then you should not be in leveraged funds at all and just stick with something like QQQ; this is perfectly acceptable and prudent. Or QLD, which is a 2x version of the Nasdaq 100 and has also done very well.]

Imagine it’s January 2026. Trump was inaugurated a year ago to this day. Like in 2016-2017, the media put out a bunch of articles warning about how Trump would be bad for the economy and tank the stock market. And just as before, they were wrong, and QQQ gained 30-50% for 2024 and another 30-50% for 2025 on the heels of optimism about tax cuts, Ai, huge tech earning and the usual factors.

But you sat it out for fear of the market being overextended and economic uncertainty, just as the media instructed. So now you left 6-8x gains on the table via TECL or TQQQ compounding, or 4x gains with QLD compounding. Even if there was another crash like in 2022, 2020, or even 2008, you would still not be able to buy back at those February 2024 levels.

You think the market is overextended or overbought, and it keeps going up. This why you have to sometimes unplug that doubting part of your brain. That part that says “this is overextended” or “what if?” You have to shut that off. Yes, there could be a crash like 2022 again, but you have to ALSO ask, “what if not?” Then how much are you leaving on the table by selling now.

[0] Thee CAGR of leveraged tech is about 24% for QLD (the 2x version of the Nasdaq 100), which is comparable to Berkshire Hathaway’s long-term returns. The CAGR of TQQQ (the 3x Nasdaq 100) since 2010 is anywhere from 40%, or comparable to Renaissance Technologies (after fees), and this includes the 2022 bear market.

[1] QQQ and its leveraged versions may have outsized risk to individual stocks that comprise it, such as Apple, Nvidia, Microsoft, and Google.

[2] With a margin account, you borrow money from the broker at a fee. So with 100% margin, you are borrowing 100% of your capital. The broker may assess very high fees, from 5% or more above the ‘prime borrowing rate’. Leveraged tech ETF issuers, being major financial institutions, are able to borrow at the prime rate or close it, which is more cost efficient for investors. This can mean saving 5%/year in not having to pay inflated borrowing fees. Also, there is less path dependence in terms of margin calls and forced liquidation. If you borrow 100% and the underlying falls 50%, your investment may be automatically liquidated to protect the broker, leaving you with close to nothing. Leveraged ETFs instead ‘decay’ lower, asymptotically approaching zero in the worst possible case but not actually reaching zero unless shut down in extremely rare cases.

[3] To those who say, “Bitcoin has/will do much better than tech stocks!,” yes, this was true pre-2018, but since 2018 the scales have tipped in favor of leveraged tech. As I discuss in the post Five years later, the verdict is in: Big tech beats crypto, TQQQ/TECL have actually outperformed Bitcoin since early 2018, and Bitcoin is only tied with QQQ (but way more volatility on the part of Bitcoin). Given that Bitcoin is much more commodity-like than stock-like, I expect for it to lag stocks in the long term given the historical tendency of commodities to underperform stocks.