U.S. artificial intelligence tumbled Monday after China AI company DeepSeek revealed it developed an advanced AI model at a fraction of the cost of what’s been seen in this country.
DeepSeek announced it developed an AI model for just $6 million in mere months. That was enough to batter tech stocks. Making matters worse, the firm said it did so using semiconductors that aren’t as fresh (or as costly) as what domestic firms are deploying. Those headlines stoked a matriculation into defensive sectors. That indicates the Invesco QQQ Low Volatility ETF (QQLV ) could be a fund to consider over the near term.
QQLV, which debuted in December, has ties to the AI-heavy Nasdaq 100 Index (NDX). But there are key differences between the ETF and that gauge. The least of those is significantly lower exposure to tech stocks and a more defensive posture. Both of those could be relevant against the backdrop of DeepSeek advancements.
QQLV Matters Now
Monday was just a single trading day. But there’s evidence suggesting the DeepSeek news prompted traders to depart the technology sector and move toward more defensive groups. Those include consumer staples. Should that shift prove durable, that could be relevant to investors considering QQLV. That’s because the ETF allocates nearly a quarter of its weight to staples names, making that its largest sector weight.
Bolstering its defensive credentials, QQLV also has a weight of nearly 8% to the utilities sector. The ETF devoties nearly a third of its portfolio to consumer staples and utilities equities. So QQLV could be a better bet than broader market funds regarding buffering against AI-related volatility. For example, the S&P 500 allocates just 8% of its roster to staples and utilities equities.
While those sectors are often viewed as boring, particularly when measured against tech, boring could beautiful if tech angst rises or if investors simply move toward equity income away from growth. Plus, there may be value among staples stocks.
“With a stable economic backdrop and a supportive Federal Reserve, I believe the consumer staples sector may be well-positioned for a return to normal fundamentals,” noted Fidelity portfolio manager Ben Shuleva. “My focus remains on core fundamentals and traditional industry drivers, with an aim of identifying favorable market structures and strong growth profiles. Additionally, wide valuation spreads may present numerous opportunities to invest in turnaround stories and undervalued stocks, making this an exciting time for the sector.”
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