Cathie Wood, the founder and CEO of Ark Investment Management, discussed on Bloomberg TV the market implications of the Chinese AI startup DeepSeek’s recent developments, which significantly stirred markets on Monday. Wood highlighted that the rapid decline in the cost of AI innovation is shifting market dynamics within the tech industry.
Wood pointed out that the cost of AI training has been dropping by 75% annually, with inference costs falling even more dramatically at 85-90% per year. This shift, she explained, is moving the industry’s focus from training chips, where Nvidia (NVDA) has been dominant, towards a more competitive landscape in inference chips. This change could broaden the playing field, potentially benefiting companies not directly involved in AI training but in inference applications.
She elaborated on these shifts by describing changes in the “tech stack.” Wood predicts that Platform as a Service (PaaS) providers, like Palantir (PLTR), in which ARK holds investments, will gain ‘significant’ market share. Infrastructure as a Service (IaaS) is expected to stabilize, while Software as a Service (SaaS) might see a relative decline in market share. However, she emphasized that all these sectors would still experience rapid growth, just at different rates.
Addressing investor queries about whether to “buy the dip” in light of these developments, Wood suggested that the full implications are still unfolding. ARK is preparing to release its “Big Ideas” report, which will delve deeper into these tech stack shifts, offering more clarity on investment strategies.
On the positive side for businesses, especially those leveraging AI for inference rather than training, Wood sees an extremely bright future. She mentioned that AI’s most impactful applications currently include enhancing productivity, advancing autonomous mobility (like cars and drones), and revolutionizing healthcare through the convergence of AI with technologies like CRISPR for disease treatment.
Regarding the broader implications for U.S. tech and the notion of U.S. technological exceptionalism, Wood views DeepSeek’s advancements as healthy competition. She believes that this competition, along with the falling costs of innovation, could benefit not just the U.S. but the global tech scene. Wood also noted the shift in Chinese policy from “common prosperity” to “new productive forces,” signaling a focus on innovation over just margin control.
Finally, she addressed the seeming disconnect between the falling cost of innovation and the performance of mid-cap tech firms versus the hyperscalers. Wood suggested that there’s an ongoing debate and a tug-of-war between mega-cap stocks and smaller entities within the market. She speculated that the extreme market concentration might give way to a more diversified market, a trend her portfolios are already reflecting. She also cautioned against heavy regulation of AI at this nascent stage, comparing it to the internet in the early ’90s, where the full potential was yet to be realized.
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