Cathie Wood says the US economy is a "compressed spring" as AI and cryptocurrencies drive a new productivity cycle

Source: Yellow Original Title: Cathie Wood says the U.S. economy is a “compressed spring” as AI and cryptocurrencies drive a new productivity cycle

Original Link: ARK Invest, CEO Cathie Wood stated that the U.S. economy is poised for a strong rebound after years of policy-induced tension, and argued that deflation driven by artificial intelligence and digital assets could transform growth, inflation, and capital markets over the next decade.

In a note to investors published on Saturday, Wood described the past three years not as economic resilience, but as a “rotational recession” that quietly compressed housing, manufacturing, capital spending, and consumer confidence following the Federal Reserve’s rapid rate hike cycle.

With these pressures already priced in, she noted that the economy resembles a “compressed spring” capable of releasing accumulated growth as inflation, interest rates, and regulatory constraints ease.

Productivity, not speculation, at the heart of the thesis

Wood dismissed concerns that the AI boom has already reached bubble territory and instead argued that the sector is still in its early economic phase.

She pointed to sharp declines in AI training and inference costs and accelerated adoption across sectors as signs that productivity gains are just beginning to materialize.

According to ARK’s analysis, convergent innovation platforms—including AI, robotics, energy storage, blockchain technology, and genomic sequencing—could boost U.S. productivity growth to between 4% and 6% annually in the coming years.

Such advances, Wood said, would exert sustained downward pressure on unit labor costs, enabling economic growth to accelerate without reigniting inflation.

This dynamic challenges traditional macroeconomic assumptions that faster growth must come at the expense of price stability.

Capital spending shifts from peak to trough

Wood also highlighted a structural change in capital investment.

After decades of stagnation following the dot-com and telecom busts, capital spending surged during the pandemic and, according to ARK, has now established a higher base rather than a temporary peak.

She argued that policy changes, such as accelerated depreciation, lower effective corporate tax rates, and deregulation, could amplify this trend and support what ARK considers a historically significant investment cycle led by technological infrastructure and manufacturing.

Bitcoin and markets in an era of deflationary growth

The note also addressed asset allocation, contrasting the recent rally in gold with Bitcoin’s limited supply design. Wood claimed that Bitcoin’s low correlation with traditional assets positions it as a potential diversifier in a productivity-driven expansion, rather than merely a crisis hedge.

Wood envisioned the coming years as a break from post-1970s economic patterns and suggested that technological deflation could allow for coexistence of growth, falling inflation, and lower long-term interest rates—a scenario that markets have yet to fully price in.