AI faces correction risks! Cathie Wood warns: As interest rates rise next year, the market will be "shivering with fear."

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ARK Invest CEO "Cathie Wood" has warned that as interest rates may begin to rise next year, the market will face a "chilling" adjustment, and valuations in AI-related fields will also face a "reality check."

On Tuesday, during the Future Investment Initiative (FII) summit held in Riyadh, Saudi Arabia, she stated, she expects the main focus of market discussions to shift from rate cuts to rate hikes within the next year. This shift could trigger a significant market reaction.

Although Wood warned of short-term adjustment risks, she explicitly refuted claims of an AI bubble. She believes that in the long run, the valuations of big tech companies are reasonable, as the world is at the beginning of a technology revolution driven by AI.

Wood's remarks come at a time when global financial institutions are increasingly concerned about the overvaluation of tech stocks. Earlier this month, both the International Monetary Fund (IMF) and the Bank of England warned that if investor enthusiasm for AI cools, the global stock market could run into trouble.

The Market Will Face a "Reality Check"

Wood elaborated on her views of short-term market risks. She predicted that with changes in the interest rate environment next year, the market will experience a "shudder."

"We will see at some point next year that the focus of market discussions will shift from rate cuts to rate hikes," Wood said. She pointed out that although many believe innovation has a negative correlation with interest rates, historical data does not support this view. She hopes to "dispel this notion."

However, Wood added that, given "the way algorithms operate today," the upward trend in interest rates could still trigger the "reality check" she described. These remarks come as companies and investors are pouring huge sums into the tech sector, raising concerns about excessive valuations.

Refusing to Admit an "AI Bubble"

Despite warning of short-term risks, Wood remains firmly bullish on the long-term prospects of AI 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 believes that this is only "the beginning of a technological revolution." She acknowledged that the market could experience a pullback, as many people worry "whether all this is happening too much and too fast," but she believes that, in the long term, big tech companies’ valuations will be reasonable.

Wood also pointed out that enterprise-level adoption and transformation for AI will take time. "Large enterprises need time to prepare for transformation," she added:

"This requires companies like Palantir to go into large enterprises and conduct true restructuring, in order to really capitalize on the productivity gains that we think AI will unleash."

Wood's views echo the recent cautious attitudes of several regulators and business leaders. Earlier this month, IMF Managing Director Kristalina Georgieva advised:

"Fasten your seatbelt: uncertainty is the new normal, and it's going to be with us for a while."

In addition to the IMF and the Bank of England, several other well-known figures, including OpenAI's Sam Altman, JPMorgan Chase CEO Jamie Dimon, and Federal Reserve Chairman Jerome Powell, have also expressed concerns about the risk of a market pullback triggered by surging AI spending.

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