Cathie Wood, the founder of Ark Invest, manages approximately $12 billion in assets through her exchange-traded funds (ETFs). With a keen eye on macroeconomic trends and major technological disruptions, Wood recently shared her concerns and optimism during an interview at the Forbes/SHOOK Top Advisor Summit in Las Vegas. She expressed worries about a hard landing for the U.S. economy but believes that artificial intelligence (AI) holds the key to a potential recovery.
A hard landing – but not excessively so
In recent years, inflation has become a prominent concern, primarily triggered by the aftermath of the COVID-19 pandemic. As a response, the Federal Reserve has raised interest rates to levels not seen in years, prompting many leading economists to predict an impending recession. However, the U.S. economy has displayed remarkable resilience, particularly in terms of employment, leading some economists to revise their recession forecasts.
Cathie Wood, on the other hand, remains cautious and leans towards the more pessimistic outlook. She voiced her concerns at the Forbes/SHOOK summit, stating, “We’re going to have a harder landing than most people expect – particularly in the rest of the world, but also in the U.S.” Importantly, she emphasized that this economic hard landing is unlikely to reach the severity of the 2008 financial crisis.
AI to the rescue
Despite her concerns about the economy, Cathie Wood remains optimistic about the role of innovation in mitigating these challenges, particularly through AI. Wood firmly believes that “Innovation solves problems – especially AI.” She highlighted three key technologies that are poised to drive substantial growth: AI, robotics, and energy storage, with AI leading the pack.
There are compelling reasons to share Wood’s optimism. Technological innovation, especially in AI, has the potential to reduce the cost of goods and services, leading to lower prices. This, in turn, can empower consumers with increased purchasing power, stimulating economic growth as spending rises. Many companies have already begun harnessing AI to cut operating costs, further supporting Wood’s vision.
However, Wood doesn’t view AI and technological innovations in isolation as the sole drivers of economic recovery. She also identified the strength of the U.S. dollar as another significant deflationary force, especially in light of liquidity issues in other countries like China and Japan.
AI stocks in Cathie Wood’s portfolio
As expected, Cathie Wood has allocated a significant portion of her portfolio to AI-related stocks. Here are some notable AI stocks she is heavily invested in:
Tesla (TSLA): Tesla is Wood’s top AI stock, comprising nearly 8% of her Ark Invest portfolio. Wood predicts that the growth potential of autonomous ride-hailing powered by AI, often referred to as robotaxis, presents a tremendous opportunity for Tesla. She envisions the stock potentially surging by more than 5.5 times by 2027, with a substantial portion of its valuation tied to the robotaxi market.
UiPath (PATH): Another AI stock high on Wood’s list is UiPath, which leads in AI-powered robotic process automation (RPA). UiPath aims to outperform humans in performing digital tasks consistently and efficiently. Ark Invest has described UiPath as part of the “sleeper wave” in AI, indicating its significant potential.
Twilio (TWLO): Wood has also shown strong support for Twilio, an up-and-coming AI player. Twilio’s customer engagement platform enables real-time communications integration with applications, and Ark Invest believes that generative AI will play a pivotal role in how companies interact with their customers, with Twilio positioned as a leader in this space.
Cathie Wood’s outlook on the U.S. economy may be tinged with caution, but her optimism regarding the potential of artificial intelligence to address economic challenges is striking. She believes that AI, along with other technological innovations, can help counter deflationary forces and drive economic growth by reducing costs and empowering consumers.
As Wood continues to bet heavily on AI stocks like Tesla, UiPath, and Twilio, her investment choices reflect her belief in the transformative power of AI. Whether AI will indeed come to the rescue and steer the economy away from a hard landing remains to be seen, but one thing is clear – Cathie Wood’s vision for the future is closely tied to the potential of artificial intelligence.
