The ongoing AI arms race, spurred by disruptive developments such as DeepSeek's latest models, has thrust funds with significant exposure to AI and tech stocks in the spotlight again.

Adding to the disruption, a report by Reuters said Alibaba Group Holding Ltd – ADR (NYSE:BABA) launched its Qwen 2.5-Max AI model on Jan. 29, claiming it outperforms DeepSeek-V3, OpenAI's GPT-4.0 and Meta's Llama-3.1-405B. This escalating competition opens a great opportunity for investors to cash in on the trend while it lasts, through AI-focused ETFs.

Here are three AI and tech-based ETFs to watch:

Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ)

This fund provides broad exposure to top AI companies, including semiconductor firms and software developers. Expense ratio for this ETF is 0.68%. Holdings include NVIDIA Corp (NASDAQ:NVDA), Microsoft Corp (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOGL)(NASDAQ:GOOG), all of which are integral to AI advancements. Among international exposure are stocks of Alibaba and Tencent Holdings Ltd., which are frontrunners in the AI race. We will discuss more about why these stocks are in focus today a little later in the article.

ARK Autonomous Technology & Robotics ETF (BATS:ARKQ)

Managed by Cathie Wood's ARK Invest, this fund targets companies playing in AI-driven automation and robotics. Tesla Inc (NASDAQ:TSLA), Nvidia and other AI-centric firms dominate its holdings. It charges an expense ratio of 0.75%.

Invesco QQQ Trust (NASDAQ:QQQ)

Though not AI-specific, this ETF offers exposure to the biggest names in tech, many of which are leading AI developers. Its holdings include Microsoft, Apple Inc (NASDAQ:AAPL), and Amazon.com Inc (NASDAQ:AMZN), all of which are making major AI investments.

Also Read: DeepSeek’s AI Breakthrough Benefits Microsoft, But Oracle Faces Cloud Growth Challenges: Analyst

DeepSeek's Market Disruption

DeepSeek's ability to deliver high-performance AI at low cost has taken Silicon Valley by storm, prompting a price war in China. Global investors were left scrambling to reassess their AI bets. The company's DeepSeek-V3 model, launched on Jan. 10, followed by its R1 model on Jan. 20, threw tech stocks on a slide and forced competitors to rethink their strategies.

Alibaba's quick response with its Qwen 2.5-Max AI model has only intensified the battle. The Chinese tech giant asserts that its model outperforms DeepSeek-V3, OpenAI's GPT-4o, and Meta's Llama-3.1-405B. Meanwhile, ByteDance, Baidu (NASDAQ:BIDU), Tencent and a slew of other Chinese AI players have been racing to upgrade their own AI offerings. Tencent has developed several upgrades on its AI model Hunyuan, according to the Wall Street Journal. Baidu with its Earnie Bot and ByteDance with its Doubao are close behind.

The disruption also triggered questions among investors in U.S.-listed AI companies on the massive spending plans of industry leaders, particularly as a cost-efficient alternative emerges from China.

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