ARK warns: markets will "shiver" as interest rates rise next year
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ARK warns: markets will "shiver" as interest rates rise next year
AI poses alignment risks!
Navigating Web3 tides with focused insightsAuthor: Zhang Yaqi
Source: Wall Street Insights
Cathie Wood, CEO of ARK Invest, warned that as interest rates may begin rising next year, the market will face a "chilling" adjustment, and valuations in artificial intelligence-related sectors will undergo a "reality check."
On Tuesday, during the Future Investment Initiative (FII) summit in Riyadh, Saudi Arabia's capital, she said she expects market discussions to shift from rate cuts to rate hikes within the coming year—a transition that could trigger a sharp market reaction.
Although Wood cautioned about near-term adjustment risks, she clearly rejected claims that an AI bubble currently exists. She believes that in the long run, valuations of large tech companies are justified, as the world stands at the beginning of an AI-driven technological revolution.
Wood's comments come amid growing concerns among global financial institutions about high valuations in tech stocks. Earlier this month, both the International Monetary Fund (IMF) and the Bank of England warned that global stock markets could face trouble if investor enthusiasm for AI cools down.
Market Awaits a "Reality Check"
Wood elaborated on her views regarding short-term market risks. She predicted that changes in the interest rate environment next year will cause the market to experience a "shudder."
"At some point next year, we’ll see the market narrative shift from rate cuts to rate hikes," Wood said. While many believe innovation is negatively correlated with interest rates, historical data does not support this view, she noted. She hopes to "dispel this notion."
However, Wood added that given "the way algorithms operate today," a rising rate trend could still trigger what she calls a "reality check." Her remarks come as businesses and investors pour massive funds into technology, raising concerns about overvaluation.
Rejecting the 'AI Bubble' Label
Despite warning of short-term risks, Wood remains firmly bullish on AI’s long-term prospects and denies the existence of a bubble.
"I don't think AI is in a bubble," Wood responded directly when asked about the issue. She sees the current moment merely as "the beginning of a technological revolution." She acknowledges the market might correct, as many worry whether "this is all happening too much, too fast," but she believes large tech companies’ valuations will be justified in the long run.
Wood also pointed out that corporate adoption and transformation involving AI take time. "Large enterprises need time to prepare for transformation," she added:
"It requires companies like Palantir to enter large enterprises and truly restructure them before we can fully realize the productivity gains we believe AI will unleash."
Wood’s views echo recent cautious statements from several regulators and business leaders. Earlier this month, IMF Managing Director Kristalina Georgieva advised:
"Buckle up: uncertainty is the new normal, and it’s here to stay."
Besides the IMF and the Bank of England, prominent figures including OpenAI’s Sam Altman, JPMorgan Chase CEO Jamie Dimon, and Federal Reserve Chair Jerome Powell have also expressed concerns about the risks of a stock market pullback due to surging AI spending.
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