ARK Invest CEO Cathie Wood has urged the Federal Reserve to account for deflationary pressures caused by AI software. Wood argues that current inflation metrics, specifically the Consumer Price Index (CPI) and Producer Price Index (PPI), fail to reflect the rapid decline in costs associated with AI inference.
According to Wood, AI inference costs have seen a 99.99% annual decline at constant performance levels. She characterizes this trend as supply-side productivity gains rather than demand-driven deflation. As evidence of robust demand, she points to OpenAI, whose annual revenue run rate has grown from $20 billion to a projected $70 billion.
Wood suggests that real-time inflation trackers, such as Truflation, show core inflation between 1% and 2.1%, which is lower than official government statistics. ARK Invest forecasts that real GDP growth could surpass 7%, while inflation may drop below the Fed’s 2% target.
The potential adoption of this perspective by the Federal Reserve could influence future interest rate policies. Wood has previously challenged inflation concerns raised by Bill Ackman, labeling the AI-driven cost reduction as good deflation. She notes that these trends are primarily concentrated in software and inference.
