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By Jules Rimmer

Wood wants to disabuse investors of the notion that innovation and interest rates are inversely correlated.

Cathie Wood says interest rate hikes will take the steam out of the market.

Cathie Wood is a firm believer that the economy is on the precipice of a technological revolution. At some point next year, though, she warns, interest rates will reverse and that is going to prompt a “shudder throughout the market” and a reality check on AI valuations.

As the chief executive officer of Ark Invest, the $20 billion investment management firm based St. Petersburg, Florida, Wood has been a high-profile disciple of disruptive technologies since she established her company just over a decade ago. Interviewed by CNBC while attending the Saudi Future Investment Initiative conference in Riyadh, Wood does not think there’s an AI bubble and reckons in the long term, valuations will be justified.

She does, however, foresee a problem at some stage next year when the narrative around interest rates shifts from them falling to rising.

That’s considerably different than market expectations the Fed’s interest rates will be in a range between 2.75% and 3% at the end of next year.

Wood wants to check the misconception that “innovation and interest rates are inversely correlated.” “That is not true over history,” she says.

For Wood, though, whose signature exchange-traded fund, ARK Innovation ETF ARKK , has rallied about 58% so far in 2025, the increase in rates “will come for good reasons” owing to better growth. Wood paid tribute to the Trump administration’s initiatives in the technology sphere with the crypto and AI czar, boosting sentiment and innovation.

She also applauded the One Big Beautiful Bill Act for its success in encouraging deregulation, as well as the tax cuts which she thinks will see the overall effective tax rate for American corporates fall to approximately 10%. Specific changes in accounting, allowing for much more rapid depreciation, will boost innovation in the tech sector even further.

Wood is most enthusiastic about plays on robotics, AI, energy storage, blockchain technology and multiomic sequencing in healthcare, a means of gaining a more comprehensive understanding of complex biology in health and disease using genomics, proteomics and so on. She does caution investors that larger corporations will take time to adopt and incorporate AI operationally within their organizations.

In the past week or so, ARK Invest ETFs made made significant divestments in Palantir (PLTR), Shopify (SHOP) and Advanced Micro Devices (AMD) while making purchases in China tech stocks like Alibaba (BABA) (recently making ambitious investments into AI) and Baidu (BIDU).

-Jules Rimmer

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  10-28-25 0544ET
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