Ark Invest's Cathie Wood sees potential 'reality check' ahead for AI stocks

Ark Invest CEO Cathie Wood said the booming artificial intelligence sector could face a valuation “reality check” as market expectations collide with shifting interest rate dynamics.

Speaking to CNBC’s Dan Murphy at the Future Investment Initiative in Riyadh, Wood said markets may soon transition from expectations of lower borrowing costs to concerns about rising rates. That shift could trigger volatility, especially in high-growth technology names.

“There will be a shudder in markets,” Wood said, adding that many investors incorrectly assume innovation and interest rates move inversely. “The way algorithms work these days, we think there will be a reality check.”

Tech valuations have soared as companies race to expand AI capabilities. Global institutions such as the IMF and Bank of England have warned that a reversal in investor enthusiasm could spark a broader stock correction.

Still, Wood said she remains convinced that Big Tech valuations are justified over the long term. She described the world as being in the “very beginning of a technology revolution,” driven by embodied AI and productivity transformation inside enterprises.

Asked whether AI is currently in a bubble, she replied: “I do not believe AI is in a bubble,” though she acknowledged inevitable corrections ahead.

Investors are now watching major earnings announcements and a U.S. Federal Reserve rate decision expected to deliver another cut this year.

(Reporting based on CNBC.com)