Cathie Wooden highlights the danger of a market correction however dismisses fears of an AI bubble

Cathie Wood, Managing Director of Ark Investment Management LLC, during the Federal Reserve’s Payments Innovation Conference in Washington, DC, USA, on Tuesday, October 21, 2025.

Aaron Schartz | Bloomberg | Getty Images

ARK Invest CEO Cathie Wood on Tuesday dismissed fears of an artificial intelligence bubble while highlighting the possibility of a “reality check” on AI ratings.

Speaking to CNBC’s Dan Murphy on the sidelines of Saudi Arabia’s Future Investment Initiative (FII) in Riyadh, Wood said markets will “shake” if interest rates start to rise.

“We will reach a point next year where the discussion will shift from lower interest rates to rising interest rates,” said the closely watched investor.

“There are a lot of people out there … who think that innovation and interest rates are inversely correlated. That’s not true throughout history,” Wood said.

“I want to disabuse people of that notion. But nonetheless, we believe there is a reality check, shall we say, in the way algorithms work today.”

Her comments come amid concerns about rising technology valuations as both companies and investors pour money into the sector.

Wood is one of many business leaders who have weighed in on the AI ​​bubble debate, particularly as AI-driven spending has led to record deals and valuations.

Earlier this month, the International Monetary Fund and the Bank of England became the latest financial institutions to warn that global stock markets could be in trouble if investor appetite for artificial intelligence wanes.

IMF chief Kristalina Georgieva gave investors blunt advice at the time: “Buckle up: uncertainty is the new normal and it is here to stay.”

She joined the likes of OpenAI’s Sam Altman, JPMorgan CEO Jamie Dimon and Federal Reserve Chair Jerome Powell in warning of the risk of a stock market correction as AI spending increases.

Wood: AI is not in a bubble

However, Ark Invest’s Wood said Big Tech’s valuations will make sense in the longer term.

“I’m not saying there will never be corrections. Of course there will be, because a lot of people are wondering, ‘Okay, is this too much, too soon?’ “But if our expectations of AI, particularly embodied AI in the way I just described, are correct, we are at the very beginning of a technology revolution,” Wood said.

When asked if AI is currently in a bubble, Wood replied: “I don’t think AI is in a bubble. However, I think on the enterprise side it will take a while for large companies to prepare for the transformation.”

She added: “A company like Palantir needs to get into the largest companies and really transform them to really take advantage of the productivity improvements that we think AI will bring.”

Global markets rallied earlier this week, with investors buoyed by hopes that the US and China could soon reach a deal on trade. US stocks jumped to new records on Monday and Asian markets also posted solid gains.

Investors are closely watching a number of key market catalysts, including Big Tech’s earnings and a Federal Reserve interest rate decision. The Federal Reserve is widely expected to cut interest rates for the second time this year.