Cathie Wood Pushes Back On Bubble Narrative, Says AI Boom 'Has Just Begun' And We're In The 'First Inning'

Investor and CEO of Ark Invest, Cathie Wood, has pushed back against claims of an unsustainable bubble in the AI and crypto markets, saying that the current liquidity strain is temporary and poised to reverse course soon.

The Liquidity Squeeze Will Reverse

On Monday, in a post on X, Wood said, “the AI story has just begun,” while featuring a snippet from the latest episode of Ark Invest’s “In The Know” podcast.

In the podcast, Wood said the long-term opportunity remains intact on artificial intelligence and cryptocurrencies, despite short-term volatility and skepticism about productivity impacts. “We think this AI story has just begun,” she said. “We are in the first inning.”

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Referring to the recent pullbacks in the market as a “liquidity squeeze,” Wood said that this will reverse course over the next “few weeks.”

Accelerating Commercial And Consumer Demand For AI

Responding to a recent MIT study that argued “corporations aren’t seeing any productivity gains” from AI and concluded “it’s a bubble,” Wood pushed back, framing the issue as a transitional phase.

She said companies must “restructure and transform completely” to unlock AI’s full potential, a process that “will take time.”

“Yet on the consumer side, it is flourishing,” she said, highlighting the massive adoption of AI chatbots and tools such as ChatGPT, among consumers.

She highlighted Palantir Technologies Inc. (NASDAQ:PLTR) as evidence of rising enterprise demand, noting its “U.S. commercial business was up 123% last quarter.” According to Wood, the surge reflects mounting pressure among CEOs and top decision-makers to act quickly, to maintain their competitive edge.

A Dangerous Bubble In US Equities

Still, several prominent analysts and market strategists have voiced concern over the growing dominance of AI-related stocks in U.S. equity markets, warning that current valuations may be unsustainable.

The Global Strategist at Société Générale, Albert Edwards, drew parallels between current market conditions and the dot-com bubble of the late-1990s.

Edwards also highlighted the key differences in the current scenario, noting the economy’s heavy dependence on AI spending and investments, which makes it a lot more vulnerable compared to similar-sized bubbles that were seen historically.

Investor and author Ruchir Sharma echoed similar concerns, arguing that the United States has become “one big bet on AI,” with 40% of U.S. economic growth this year being driven by growing AI capital expenditures.

Sharma also said that this massive capex has masked several other concerns in the broader economy, which he said is closer to stall speed.

Microsoft Corp. (NASDAQ:MSFT) founder and billionaire Bill Gates acknowledged the existence of a bubble, while emphasizing the “profound” value of AI, which he said was “hard to overstate.”

Gates said that the AI frenzy is far from the “Tulip Mania,” referring to the historic bubble surrounding Tulip bulbs in the Netherlands in the 17th Century. He said that it was instead far more similar to the early stages of the internet in the late 90s.

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