Ark Invest CEO Cathie Wood told CNBC on Friday that investors’ concerns actually make her more optimistic that more gains are in store, dismissing this week’s market jitters.
U.S. stocks fell sharply on Thursday, reversing the initial gains seen after the midterm elections. AI-related stocks led the decline, and the Nasdaq Composite Index, which has a high proportion of tech stocks, fell into correction territory. Tech stocks tentatively recovered on Friday.
Much of Thursday’s selling was driven by concerns that a Democratic-led Congress would slow data center construction. But concerns about artificial intelligence, particularly concerns about capital spending, cash flow, debt, and circular financing, caused instability on multiple occasions throughout the year.
Wood, whose firm manages a variety of funds focused on technology and innovation, told CNBC that there is currently a “wall of fear” in financial markets. But her decades of experience as an investor give her a somewhat unconventional view of the current state of the game.
“I went through the technology and communications bubble, but I wasn’t too worried about it,” she said. “There was a bull market in the ’80s and ’90s where people just believed this was going to go to the moon. This (AI trading) didn’t evolve that way.”
He explained that “from the beginning” many investors were concerned about how much companies were spending on AI development, how fast that spending was happening, and how hyperscalers went from extremely positive free cash flow to negative free cash flow.
“That has made the market nervous for quite some time,” she says. “I always feel good when the market is worried, because it tends to signal a more sustained bull market. We don’t think we’ve derailed this bull market.”
Markets are facing a “wall of uncertainty”
In 2025, her flagship will be Ark Innovation ETF rose more than 35%, far outpacing the S&P 500’s 16.4% rise and the Nasdaq Composite’s 20.5% rise.
Asked Friday if the market was nearing the end of the current bull market, Wood said, “I don’t think so.”
“I think we are in the midst of a technology revolution,” she said, pointing to developments in technology such as robotaxis and AI agents.
Wood noted that one risk that could become a “significant problem” is the rise in the cost of capital.
Interest rates and bond yields have risen sharply this year as the war between the United States and Iran has caused inflation to rise around the world. Corporate bond yields are also rising, with creditors demanding more compensation for loans to companies.
“This correction is partially due to what’s happening in the bond market,” Wood said Friday.
“I’ve been saying for quite some time that the wall of fear was built by young financial executives during the bubble,” she said.
“It’s the elder statesmen and women of the industry who maintain this wall of insecurity, and that’s not a bad thing. Add to this the bond investors. The old bond investors didn’t need technology. It was software. Low fixed costs. It was a viral app, and the margins were very high. Fixed-income investors are experiencing the technology world and going on a journey into the technology world, which they haven’t really experienced before.”
But she noted that AI hyperscalers are somewhat isolated in their growth opportunities.
“If companies think that taking on debt will accelerate their momentum, their growth rate, then it doesn’t really matter what the interest rates are for those companies,” Wood explained.
Tech stocks rebounded Friday after strong selling pressure in pre-market trading.
Wood said his advice to investors in the current volatile environment is to identify high-conviction positions and double down on them as the market changes.
“When you see a rise in a volatile environment, you should take profits. When you see a decline, taking profits will give you the psychological cushion to move back,” he said.
“That’s our job. So what we do in times like this is to focus on the names we have the most confidence in. So that’s what we’ve been doing for the past week or so. Our SpaceX position is rising. If anything, the controversy over data centers on Earth is creating a huge opportunity for data centers in space.”
Wood said he expects stock prices to continue rising in 2027.
“This is two steps forward, one step back,” he said of the post-election turmoil. “Next year the revolution will become more and more clear and the market will do well.”
