BlackRock's attempt to challenge Invesco's dominance in the Nasdaq-100 ETF market is showing early signs of traction, but the asset manager still has a long way to go before it dents the grip of the $453 billion Invesco QQQ Trust (QQQ).

According to a JPMorgan flow note, BlackRock's iShares Nasdaq-100 ETF (IQQ) attracted $4 million in net inflows on July 24, following $12 million the previous day. The gains came after several days of modest inflows, suggesting investor interest is beginning to build following the fund's recent launch.

However, the numbers also underscore just how difficult it is to dislodge one of the world's largest ETFs.

On the same day IQQ gathered $4 million, QQQ pulled in nearly $1.2 billion of fresh money—almost 300 times more. In fact, during the period of July 9 (the day IQQ was launched) and July 24, most of the sessions brought in between $1 billion and $3 billion in inflows for QQQ. Meanwhile, IQQ could pull in $239 million in total during the period.

Trading activity painted an even starker picture. Taking the example of July 24, while about $22 million worth of IQQ shares changed hands on July 24, QQQ traded nearly $29.4 billion, highlighting the liquidity advantage that continues to attract institutional investors.

The Fee War Isn't Enough—Yet

BlackRock launched IQQ with an annual expense ratio of 10 basis points, undercutting QQQ's 18-basis-point fee and matching State Street's recently launched SPDR Nasdaq-100 ETF (QNDX). Invesco's lower-cost sibling, Invesco NASDAQ 100 ETF (QQQM), charges 15 basis points.

For long-term investors, lower fees can translate into meaningful savings over time, particularly on large portfolios. But the latest flow data suggests investors continue to prioritize liquidity, trading efficiency and an established options market over marginal fee differences.

QQQ remains one of the most actively traded ETFs globally, with daily trading volumes routinely exceeding $20 billion, making it a preferred vehicle for hedge funds, institutions and active traders.

Invesco's Biggest Competitor May Be Its Own ETF

The flow data also suggests BlackRock's bigger challenge may not be QQQ itself, but QQQM.

While IQQ has only begun attracting modest inflows, QQQM has consistently drawn tens to hundreds of millions of dollars on many trading days despite charging a higher fee than IQQ. The fund collected $79 million on July 24 and has recorded several sessions exceeding $200 million in net inflows over the past month.

That indicates investors looking for a lower-cost Nasdaq-100 exposure have already embraced Invesco's own cheaper alternative, limiting the pool of assets available for competitors to capture.

State Street's Momentum Cools

State Street's QNDX briefly showed stronger momentum, attracting $49 million of inflows on July 23. But that proved short-lived, with flows flattening to zero the following day, according to JPMorgan.

Although it is still too early to properly judge IQQ, early flow trends suggest that while lower-cost rivals are beginning to gain attention, neither BlackRock nor State Street has yet demonstrated the sustained asset gathering needed to challenge Invesco's leadership.

For now, the Nasdaq-100 ETF market appears to be reinforcing the theory that once a fund achieves massive scale, deep liquidity and a dominant trading ecosystem, lowering fees alone may not be enough to persuade investors to switch.