On Friday, ARK Invest CEO Cathie Wood said that artificial intelligence and other breakthrough technologies are about to unleash a historic productivity boom that could drive U.S. inflation down to “zero or even negative” levels.
Wood Sees Innovation as Deflationary Force
Speaking on an episode of In the Know, Wood, popularly known for leading ARK Innovation ETF (BATS:ARKK), argued that "technologically enabled innovation is deflationary by nature," citing AI, robotics, energy storage, multiomics and blockchain as forces accelerating efficiency across the economy.
"AI can’t catalyze itself," she said, adding, "All of the other platforms are being catalyzed and I think the speed of change is going to be pretty shocking over the next few years."
Wood also highlighted that learning curves in these technologies drive down costs, creating a powerful deflationary effect even as tariffs and higher interest rates weigh on households.
See Also: Trump's Tariffs Are Hitting America Harder Than Its Rivals, Trade Data Show
Fiscal Policy, Deregulation And Tax Incentives
Wood linked the productivity outlook to fiscal and policy shifts under the President Donald Trump administration. She pointed to deregulation in nuclear energy, crypto and AI, along with new tax rules allowing accelerated depreciation of manufacturing and research and development investments.
These incentives, she said, will cause an "explosion in manufacturing capacity and all other kinds of investing" over the next few years.
She also predicted foreign direct investment will rise as the U.S. becomes more competitive on effective tax rates, which she estimated could drop to about 12%, rivaling Ireland and undercutting Hong Kong.
Productivity Gains And Growth Outlook
According to Wood, the U.S. is entering "prime time" for innovation-led growth.
She projected real GDP growth could reach 5% to 7% annually in the coming years, driven by rising productivity and demographic shifts.
"Technology is a net job creator," she noted, arguing that automation and AI will offset labor shortages from retiring baby boomers.
Wood also said the unfolding cycle could mirror the internet boom of the late 1990s, with rapid adoption and capital inflows. "We are today where we were with the internet in 1995," she said, cautioning that while early phases may see volatility, the long-term trajectory will be transformative.
Weak August Jobs Report Fuels Fed Rate Cut Bets
Wood's statements came after August's U.S. jobs report confirmed a sharp slowdown in hiring, with just 22,000 jobs added versus the 75,000 expected.
Revisions showed June payrolls actually slipped into negative territory, while July's gains were modestly upgraded.
Healthcare and social assistance drove most of the job growth, but private payrolls weakened and government jobs contracted.
The unemployment rate ticked up to 4.3%, while wage growth cooled slightly. Markets now see near-certain Fed rate cuts in September and higher odds of another in October, boosting stocks, Treasuries and gold to record highs.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
