AI Deflation May Lift Growth but Raise Rates

ARK Invest founder Cathie Wood says artificial intelligence could create “good deflation” by sharply reducing production and AI inference costs. She estimates inference costs may fall 99.99% annually at comparable performance levels, although she provided no benchmark, timeframe or source for the figure. Epoch AI research found that comparable model-performance costs have fallen by roughly 9 to 900 times annually, depending on the benchmark, with the fastest declines occurring recently. Wood said AI productivity gains could push inflation below current expectations while driving real GDP growth into the high single digits. She has previously forecast US growth of 7% to 8%, compared with global growth of about 3% in recent decades. OpenAI’s annualised revenue run rate reportedly increased from about $20 billion to nearly $70 billion, which Wood cited as evidence of accelerating AI adoption. ARK Invest also believes stronger growth could push short-term interest rates towards 6.5% to 7.5%, even as AI reduces inflation. For crypto traders, the outlook is mixed. Faster AI adoption could support long-term productivity, corporate profits and risk appetite. However, higher rate expectations and bond yields may tighten liquidity and pressure Bitcoin, Ethereum and other risk-sensitive assets in the short term. Traders should monitor inflation data, central-bank expectations, Treasury yields and AI-related equities.