Cathie Wood rebuts Bill Ackman's warning that AI demand could fuel inflation
In brief
- Bill Ackman suggested on X the Fed's 25 basis point September hike may have been a mistake.
- Ackman argued inelastic AI demand could feed a self-perpetuating inflationary spiral.
- Cathie Wood replied September 29, tying rising rates to real yields and stronger growth.
- AI inference costs have fallen 99.99% annually at constant performance levels, Wood said.
- Wood described the likely outcome as "benign deflation," according to Crypto Briefing.
Ackman's case
It started on September 25, when Ackman posted on X about the Fed's 25 basis point rate increase, as Crypto Briefing describes it. He suggested the move may have been a mistake.
His argument comes down to elasticity. If demand for AI resources is inelastic (buyers keep paying regardless of cost), higher borrowing costs might not slow AI spending, and in Ackman's framing that could feed a self-perpetuating inflationary spiral. His camp's worry is simple enough: the Fed raises rates, sees little effect on AI spending, and leaves inflation intact while other parts of the economy absorb the pain.
Wood's rebuttal
Wood replied on September 29. She argued that rising interest rates reflect genuine real yields and stronger-than-expected growth, then expanded on that view during ARK's October "In The Know" session.
She came with numbers. Wood said the 10-year Treasury yield sits at its median dating back to 1790, and that AI inference costs have fallen 99.99% annually at constant performance levels. She also pointed to OpenAI's revenue run rate climbing from $20 billion to $70 billion as evidence that cheaper operations are unlocking more usage.
That's the core of her thesis.
Wood described the likely outcome as “benign deflation”
In Wood's telling, it's the kind of deflation where prices fall because things get cheaper to produce, not because demand collapses.
What the split comes down to
Crypto Briefing's report also stated that US money supply is growing at approximately 5.7% without producing higher inflation, and that 90% of global data center financing is directed toward the United States. (Those figures come from the publication, not from either investor.)
Wood's camp believes productivity gains and cost-cutting technology can support sustained growth alongside lower or stable inflation. Ackman's camp sees that same AI spending as something a rate hike can't easily touch.
Both sides are looking at one boom. They just don't agree on what it does to prices.
Frequently asked questions
What is Bill Ackman's argument about AI and inflation?
Ackman suggested the Fed's September rate hike may have been a mistake. He argued that if demand for AI resources is inelastic, higher borrowing costs might not slow AI spending, which in his framing could feed a self-perpetuating inflationary spiral.
What does Cathie Wood mean by benign deflation?
According to Crypto Briefing, Wood described the likely outcome as benign deflation, where prices fall because goods get cheaper to produce rather than because demand collapses. She cited falling AI inference costs and OpenAI's rising revenue run rate as support.
Why does Wood say interest rates are rising?
Wood argued on September 29 that rising interest rates reflect genuine real yields and stronger-than-expected growth rather than inflation pressure. She also said the 10-year Treasury yield sits at its median dating back to 1790.
