SPMO: Becoming A Memory Trade

[Bong Hwan Ahn]

SPMO: Becoming A Memory Trade

Sep 17, 2026, 9:40 PM ETInvesco S&P 500 Momentum ETF (SPMO)SPX, SPY, MU, SNDK, STX, WDC, SKHY, PLTR

• The Invesco S&P 500 Momentum ETF remains a compelling buy, offering concentrated exposure to top-performing S&P 500 momentum names.
• SPMO's upcoming September rebalance is likely to further overweight semiconductors and energy, intensifying its divergence from the broader S&P 500.
• Recent performance highlights SPMO's efficiency in capturing rallies, with a 19.6% total return over twelve months and strong net inflows of $6.3B.
• I expect the fund's focus on AI, memory, and energy to drive continued outperformance, though increased concentration risk is a key consideration.

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Overview

When I previously covered the Invesco S&P 500 Momentum ETF (SPMO), I issued a buy rating because it was a leaner way to own the best-performing securities in the S&P 500 Index (SPX). Since then, the market has experienced its fair share of volatility and traded rangebound. Given the macro influences over the last quarter, including rate hikes, renewed conflict in the Middle East, and inflationary data, a slowdown in the equity markets isn't too unexpected. However, I wanted to revisit the fund to provide some updated insights into its outlook and value proposition.

Now that the Fed introduced a 25 basis point rate hike, I think the market initially expected equities to retreat. However, this hasn't been the case so far, and I think the market may be reading this wrong. In fact, I think that big tech won't care about rate hikes, and the positive momentum will continue. Backlog secured future revenue, and the sector looks a lot safer than investors may think. With that said, there's still a risk that we see the indices trade lower. If anything, I think that investors should see this as an opportunity to accumulate SPMO.

Looking at the performance over the last twelve months, we can see that SPMO has delivered a total return of 19.6%. Through the latest rally, SPMO was able to outperform both the State Street SPDR S&P 500 ETF (SPY) and the Invesco QQQ Trust, Series 1 (QQQ) through its peak. However, SPMO has now retreated from those highs, and the return sits slightly below QQQ.

Data by YCharts

Over the next twelve months, I believe that the memory cycle will likely serve as the next leg higher for SPMO. The fund's rules-based screen will ensure that SPMO only maintains exposure to the companies that have the best momentum scores, so if a company runs higher, SPMO is there to participate in the rally. While it's true that SPMO is constructed using the S&P 500 as its foundation, I think the fund has become more of a leveraged bet on the AI cycle more than anything else. So while you can technically get index-like exposure, I think it's important to understand the distinction here with SPMO.

Portfolio Shifts: Upcoming Rebalance

The underlying mechanics of the portfolio haven't changed, so I won't spend much time rehashing those same details. SPMO tracks the S&P 500 Momentum Index, which scores every stock within it on its price change over a trailing twelve-month period. The index also adjusts that score to take underlying volatility into account, leaving the best scoring one hundred companies and then weighting them by market cap multiplied by their momentum score. SPMO has a very reasonable expense ratio of 0.13% and currently holds 100 positions.

As demonstrated by the chart below, SPMO continues to see its underlying NAV and AUM rise over time. Additionally, the fund has experienced net inflows of $6.3B over the last twelve months. It is clear that investors are beginning to catch on that a momentum strategy can be highly efficient through market rallies.

Data by YCharts

The most noteworthy thing here would be the rebalance that happens mid-September and March. I estimate that the rebalance will happen after September 18th. This reconstitution will cover the last trailing twelve months through the end of August, and I wanted to estimate what the most meaningful changes will be. The current largest position is Micron Technology (MU) at 10.72% of assets, which is only a tiny uptick from the last coverage. Six of the largest ten positions sit within the semiconductor industry, which is expected following the sector's strong rally.

SPMO Top Ten Holdings (Invesco)

I believe that the allocation to memory and semiconductors will ultimately get heavier during this next reconstitution. We're likely to see some storage names join that top ten, including popular names like Sandisk (SNDK), Seagate (STX), and Western Digital (WDC), since they all ride the same NAND pricing momentum that Micron does. SPMO currently has exposure to all of these companies, but they sit slightly outside of the top ten.

The next big change is likely to see the energy exposure expand beyond traditional names like ExxonMobil (XOM). Crude basically ran from $60 up to the mid-$90s before topping around $110 in April. Energy names have experienced nearly a full year of appreciation at this point, so I expect that SPMO will begin to hold more of the producers and service names that benefit from this. With renewed tensions in Iran, I wouldn't be surprised to see energy stocks continue to do well over the next few quarters.

If these shifts happen, I believe that investors that own SPMO will soon hold a fund that looks even less like the S&P 500 than it does today. The actual risk here is that SPMO becomes a lot more concentrated in the AI buildout over time. While this isn't necessarily a bad thing, considering the future looks strong for this sector, the concentration may not be appealing to investors hoping to stay more aligned with the diversity of the S&P 500.

Outlook: Strong Performance Can Continue

I recently published an article that detailed why I believe that the memory shortage will get worse through 2027. In short, we are seeing growth rates that are truly unprecedented right now and years' worth of secured revenue. The contract prices for DRAM rose somewhere between 93% and 98% in the first quarter of 2026. When looking at the leaders, we get further confirmation by the impressive growth rates:

• Micron Technology: AI memory demand contributed to the 345% year-over-year revenue growth.
• SK hynix (SKHY): Revenue and operating profit increased by 257% and 557% year-over-year, respectively.
• Sandisk: Reported earnings per share of $39.25, beating expectations by $4.73.

If my thesis is correct and the fund becomes more heavily weighted toward semiconductor, memory, and energy positions, I think the fund can continue to outpace SPY. Although traditional S&P 500 funds also hold Micron and many other semiconductors, the difference comes down to the weight. SPMO is putting a lot of focus on this area, and it can be rewarding if the market continues to trend higher.

For instance, SPY currently holds MU, but it does so with a small weight of 1.63%. If MU has another great year through 2027, the actual impact on SPY may be marginal, considering SPY has a total AUM of $783B. With SPMO, the participation in another rally would be much more noticeable. We already saw this dynamic through the first two quarters of the year. When SPY topped out around 15%, SPMO was able to extend the rally to reach highs around 35%.

Data by YCharts

Another aspect of the outperformance potential can come from the rebalancing of the portfolio. A traditional fund like SPY only changes weights when market caps change, while also being stuck holding the underperformers indefinitely. Meanwhile, SPMO can trim that fat away every six months and rotate into positions that align with its objective. For instance, I believe that Palantir (PLTR) is one of the positions that may be at risk of removal. Palantir now has a weight of just 1.62%, which means the momentum score was likely reduced following the poor performance this year.

Data by YCharts

Although the latest earnings report for PLTR was solid, this is a reminder that SPMO factors in momentum score and volatility, rather than earnings growth. So even if a company is maintaining favorable momentum scores, it doesn't guarantee that the underlying earnings metrics are attractive.

Risks

I believe that one of the main risks to consider is that the memory sector is very cyclical. Demand dynamics have pushed the sector higher, but what happens when demand fades and the cycle shifts? While this risk still seems to be a year or two away, it's still something for investors to consider. Despite secured revenues and contracts for these businesses, we have already seen how investor sentiment and an underlying narrative can be a huge driver of momentum. The fact that SPMO only reconstitutes twice a year is also a problem in my opinion.

Momentum can change quickly, and I don't think that a semi-annual reconstitution cadence is enough to keep the fund aligned with the best holdings. For instance, there may be a scenario where I am correct and SPMO increases an allocation to energy companies because oil traded higher. Following the reconstitution, suppose we come to another ceasefire with Iran and the conflict completely resolves over the next month. The price of oil may retreat from its highs, and this means SPMO may be stuck holding energy names that are declining in value for two quarters. In this sense, a momentum approach works until it doesn't.

With memory estimated to be the next main driver of growth, we must also consider the risk of the demand dynamic shifting here. We may assume that the fund will simply readjust its portfolio to align with the sector that maintains the best momentum score, but what if the market has no clear direction? Suppose AI demand fades, capex spending slows, and the momentum of earnings growth starts to decline. SPMO may lose a clear edge over a more traditional S&P 500 ETF.

Takeaway

In conclusion, I maintain my buy rating on SPMO at this time. The fund is still a leaner version of the S&P 500, but it has also become a more concentrated form of it as well. The case for owning SPMO remains the attractive outlook of the memory cycle going forward. Demand remains strong, and the latest earnings season confirmed this. As long as you're an investor that is okay with the technology concentration, I believe that SPMO can continue to deliver outperformance against traditional S&P 500 funds. The narrative may change if the demand for AI slows in the near term. This concentration can work against the fund if caught holding these technology positions in an unfavorable cycle. Since the fund only has two reconstitution periods, SPMO is vulnerable to being stuck holding less desirable businesses