ETFs to Invest in Amid DeepSeek-Led Market Turmoil

The emergence of DeepSeek, a China-based artificial intelligence startup, has shaken investors' confidence in the American stock market. Its new AI has raised concerns about the future of American tech supremacy, which has been driving the stock market rally over the past two years. This has affected risk appetite globally, prompting investors to park their money in safe and defensive assets.

We have highlighted five zones and their popular ETFs wherein investors could invest amid the turbulence. The ETFs are iShares Edge MSCI USA Quality Factor ETF QUAL, Vanguard Value ETF VTV, Invesco S&P 500 Equal Weight ETF RSP, Vanguard Dividend Appreciation ETF VIG and JPMorgan Ultra-Short Income ETF JPST.

DeepSeek, a one-year-old startup, is now seen as a strong rival to OpenAI and Meta. Its technology is more cost-effective and operates on less powerful chips. The company said it had spent just $5.6 million on computing power for its base model, compared with hundreds of millions or billions of dollars spent by U.S. companies.

DeepSeek took over rival OpenAI’s coveted spot for the most downloaded free app in the United States on Apple’s App Store, dethroning ChatGPT. Its quick dominance raised concerns over Microsoft, Meta Platforms and Alphabet's hundreds of billions in planned spending on AI.

This rapid development has intensified the global AI race and introduced a new competitive dynamic in the industry, prompting a reevaluation of market positions and leading to significant financial repercussions for established technology companies. As China strengthens its AI ecosystem, U.S. companies that depend on AI-driven revenue streams could see lower revenue growth projections due to restricted market access in China.

As the top 10 stocks account for nearly 40% of the S&P 500 — an unprecedented level of concentration in modern history — the DeepSeek-led turmoil serves as a stark reminder of the risks associated with a concentrated stock market.

Let us delve deeper into the ETFs:

iShares Edge MSCI USA Quality Factor ETF (QUAL)

Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility, elevated margins and a track of stable or rising sales and earnings growth. These products, thus, reduce volatility when compared with plain vanilla funds and hold up rather well during market swings.

With an AUM of $52 billion, iShares Edge MSCI USA Quality Factor ETF provides exposure to large and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index and holding 125 stocks in its basket. The ETF charges 15 bps in annual fees and trades in an average daily volume of 1 million shares. It has a Zacks ETF Rank #3 (Hold) (read: Best Investment Strategies for 2025).

Vanguard Value ETF (VTV)

Value stocks have proven to be outperformers over the long term and are less susceptible to trending markets. These stocks have strong fundamentals — earnings, dividends, book value and cash flow. These have the potential to deliver higher returns and exhibit lower volatility than their growth and blend counterparts.

Vanguard Value ETF targets the value segment of the broad U.S. stock market and follows the CRSP US Large Cap Value Index. It holds 338 stocks in its basket with an AUM of $134.2 billion and charges 4 bps in annual fees. The ETF trades in a volume of 2 million shares per day on average and flaunts a Zacks ETF Rank #1 (Strong Buy).

Invesco S&P 500 Equal Weight ETF (RSP)

Equal-weight ETFs do a great job in managing single-security risk with their equal allocation in the entire spectrum of market-capitalization levels, regardless of size. As such, these limit the risk of a severe downfall in any particular security, providing a nice balance in the portfolio. These funds not only go a long way in reducing overall risk but also offer more upside potential due to higher concentration in small and mid-cap stocks as compared to cap-weighted funds (read: Forget Fed 'Pivot': Tap 4 Safer ETFs on Solid Fundamentals).

Invesco S&P 500 Equal Weight ETF is the largest equal-weight ETF with an AUM of $74.9 billion. It tracks the S&P 500 Equal Weight Index, which equally weighs the stocks in the S&P 500 Index and results in an exposure that tilts toward smaller companies in the S&P 500 Index. Invesco S&P 500 Equal Weight ETF charges 20 bps in annual fees and trades in an average daily volume of 6 million shares. It sports a Zacks ETF Rank #2 (Buy).

Vanguard Dividend Appreciation ETF (VIG)

Dividend-paying securities are major sources of consistent income for investors when returns from the equity market are at risk. This is especially true as these stocks offer the best of both worlds — safety in the form of payouts and stability in the form of mature companies that are less volatile to large swings in stock prices. The companies that offer dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.

While the dividend space has been crowded, ETFs with stocks having a strong history of dividend growth, like VIG, seem to be good picks. The ETF has an AUM of $89.6 billion and trades in a volume of 1.2 million shares a day on average. It charges 6 bps in annual fees and sports a Zacks ETF Rank #1 (read: 5 ETF Predictions for 2025).

JPMorgan Ultra-Short Income ETF (JPST)

Cash-like ETFs invest in ultra-short-term bonds and help investors keep aside money for a couple of weeks to a few months with almost no risk. In times of market downturns, these can act as a hedge, protecting the portfolio from significant losses. Unlike equities or longer-duration bonds, the value of cash-like ETFs is less likely to be affected by market turbulence, making them a reliable option during uncertain times.

JPMorgan Ultra-Short Income ETF invests mainly in investment-grade, U.S. dollar-denominated fixed, variable and floating-rate debt. It holds 852 bonds in its basket with an average duration of 0.76 years. The ETF has an asset base of $28.6 billion and trades in a good volume of around 6 million shares a day. It charges 18 bps in annual fees.