AI Arms Race: Could ETFs Catch The Next DeepSeek Wave Before It Goes Mainstream

When Chinese AI startup DeepSeek unveiled its latest model, R1-0528, last week, it raised eyebrows in tech circles. With performance metrics that rival, and in some areas surpass, OpenAI's GPT-4o and Google's Gemini, DeepSeek isn't just playing catch-up, it's reshaping the AI leaderboard.

And for ETF investors, this could be a turning point.

Why ETF Investors Should Pay Attention

AI has been thematic investing’s golden goose for years. From cloud giants to chipmakers, ETFs that track the sector have mostly been about a rote list of U.S. tech giants. But DeepSeek’s open-source disruption, and what it implies about intellectual property, speed of innovation, and geopolitics, means it’s time to take a wider view.

Also Read: David Mazza On MAGS’ Magnificent May: ‘The Breadth Of The Rally Stood Out’

Might U.S.-Heavy AI ETFs Be Losing Their Edge?

ETFs such as the Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) and ROBO Global Robotics and Automation Index ETF (NYSE:ROBO) are rooted in past AI winners such as Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), and Nvidia (NASDAQ:NVDA). However, if open-source substitutes such as DeepSeek take hold, particularly in enterprise and developer ecosystems outside China, these ETFs might have their core holdings challenged by competition.

Opportunity In Chinese Tech Exposure

Assets such as the KraneShares CSI China Internet ETF (NYSE:KWEB) or the WisdomTree China ex-State-Owned Enterprises Fund (NASDAQ:CXSE) might stealthily gain from a rising tide within China’s AI environment. DeepSeek is not yet public, but its pace might improve sentiment toward Chinese innovation, especially if U.S. regulatory headwinds frustrate Western AI titans.

DeepSeek: The New Star Or An Outlaw Operator?

R1-0528 is not only intelligent, it’s amazingly effective. The model scored an 87.5% on the AIME 2025 benchmark, made significant jumps in coding exams such as LiveCodeBench, and even doubled the performance on the eerily titled “Humanity’s Last Exam,” according to a report by Tom’s Guide.

Unlike OpenAI or Google, DeepSeek is staying open-source. Developers can alter and release the model as they please under the MIT License, a move that might spur adoption, particularly in markets that are hesitant to use U.S.-based platforms.

A More Open, Multipolar AI Future?

Through faster development cycles, open-source licensing, and resource-light training, startups in nations like China are illustrating that innovation doesn’t necessarily have to be anchored to trillion-dollar market caps.

For investors in ETFs, this could mean adjusting their mindset; moving from pursuing the typical Big Tech suspects to following nascent trends in open-source AI, infrastructure agility, and geopolitical trends.

As AI becomes a multipolar battlefield, it’s not merely a question of who creates the cleverest bot, it’s about who owns the tools, the techniques, and the narrative of the market. DeepSeek might not be listed on Nasdaq (yet), but its influence could soon be seen across portfolios.

Bottom Line

The AI horse race is becoming wilder, weirder, and more distributed. Clever ETF plays will track not only the money, but the momentum. And currently, some of that momentum is originating in a Chinese laboratory that just may be preparing the future, one borrowed benchmark at a time.

Read Next:

• AI Investing Just Got A New Power Player — Tesla Bull Dan Ives’ High-Stakes ETF Is Here

Photo: mundissima on Shutterstock.com