Ark Invest’s Cathie Wood Downplays AI Bubble Risks But Says A Correction Might Come

• “I do not believe AI is in a bubble,” Wood says.
• Still, large companies adopting AI need to restructure, and that might be a slow process.
• Prominent executives Sam Altman and Jamie Dimon have previously warned of the growing risk of unsustainable investment by AI and big tech companies and return dynamics for these firms.

Cathie Wood, the CEO of ARK Investment Management LLC and a prominent tech investor, on Tuesday pushed back fears of an artificial intelligence (AI) bubble, while flagging the possibility of a “reality check” on AI valuations, according to an interview with CNBC.

Speaking on the sidelines of Saudi Arabia’s Future Investment Initiative (FII) in Riyadh, Wood said, “We think there will be a reality check” next year, speaking in the context of soaring tech valuations and expectations of a rise in interest rates next year.

Earlier, top executives such as OpenAI CEO Sam Altman, JPMorgan boss Jamie Dimon, as well as Federal Reserve Chair Jerome Powell have warned of the growing risk from the unsustainable investment by AI and Big Tech companies and expectations of high returns, calling out a “bubble” build-up in the industry. The International Monetary Fund and the Bank of England also recently warned that global stock markets could be in trouble if investor appetite for AI turns sour.

Asked whether AI was in a bubble right now, Wood replied: “I do not believe AI is in a bubble. What I do think is, on the enterprise side, it is going to take a while for large corporations to prepare themselves to transform,” according to the report. 

She added: “It’s going to take a company like Palantir going into the largest enterprises and really restructuring them in order to really capitalize on the productivity gains that we think are going to be unleashed by AI.” 

That said, AI companies continue to attract massive investments and roll out large-scale data center projects, while the U.S. stock market sits at record highs driven by top tech names. The debate may get some clarity this week as five of the Magnificent Seven companies report earnings, with investors closely weighing their AI-driven revenue gains against heavy spending on the technology.

So far this year, the Invesco QQQ Trust Series 1 (QQQ), which tracks tech-heavy Nasdaq stock, has gained 23%. The SPDR S&P 500 ETF (SPY), which tracks the benchmark S&P 500 stock, has gained 17%.

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