WEBVTT - Ark Investment CEO Cathie Wood Talks  H-1B Visa Program

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio.

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<v Speaker 2>News, the tech run up that we've seen in terms

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<v Speaker 2>of stocks, and this of course after the FED and

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<v Speaker 2>its first rate cut of the year last week, and

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<v Speaker 2>the inflation data that we get out on Friday. Joining

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<v Speaker 2>us now is CEO and founder of ARC invest Kathy Would.

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<v Speaker 2>Good morning, Kathy, So you've hot footed it from our

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<v Speaker 2>TV studio into the REJO studio. We really appreciate your

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<v Speaker 2>time and we want to start on the H one

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<v Speaker 2>B visa change with President Donald Trump. It seems that

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<v Speaker 2>he has sided with magas anti immigration wing rather than

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<v Speaker 2>the tech executives that we saw him dining with only

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<v Speaker 2>a few weeks ago. How much of a concern is

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<v Speaker 2>it to you in terms of limiting those high skill

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<v Speaker 2>tech employees tech workers for some of the big names

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<v Speaker 2>that you invested in.

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<v Speaker 1>Yes, well, I think this is part of a much

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<v Speaker 1>broader negotiation, particularly with India. In mind, those negotiations have

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<v Speaker 1>not finished, and of course this is very important to India.

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<v Speaker 1>I think that our tech executives understand that this is

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<v Speaker 1>a part of a broader negotiation. I think the suddenness

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<v Speaker 1>the Friday announcement and the lack of clarity through a

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<v Speaker 1>lot of people, including US. The clarity now is this

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<v Speaker 1>applies only to new H one B visas, So I

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<v Speaker 1>think longer term, this administration has said that it is

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<v Speaker 1>very interested in bringing foreigners who have been educated in

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<v Speaker 1>the US into the US workforce, and I think longer term,

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<v Speaker 1>that's that's the way we should think about that.

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<v Speaker 2>So you see a change coming. This is punishment for India,

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<v Speaker 2>and the impacts on the US is a side effect

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<v Speaker 2>that will change.

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<v Speaker 1>It's a negotiation negotiation with India. Longer term. I think

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<v Speaker 1>President Trump and his team want to keep as much

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<v Speaker 1>innovation talent, technology talent as possible in the US.

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<v Speaker 3>Can I just ask you long term though, given the

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<v Speaker 3>Trump administration wants to keep as much talent, you also

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<v Speaker 3>have other countries raising the possibility of their own form

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<v Speaker 3>of golden visas, perhaps seeing this as an opportunity to

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<v Speaker 3>attract the same high skilled talent to their own countries.

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<v Speaker 3>Could there be longer term ramifications if this H one

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<v Speaker 3>B visa application fee does actually stay the higher fee.

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<v Speaker 1>Sure, I think this is I call this regulatory arbitrage.

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<v Speaker 1>Other companies countries should be looking at this as an

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<v Speaker 1>opportunity to attract the best and the brightest. As I said,

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<v Speaker 1>I don't think this is long term for the United States,

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<v Speaker 1>but sees the moment.

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<v Speaker 2>Okay, that's interesting that this is Yeah, Jermanica ahead, So yeah.

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<v Speaker 3>No, no, I just wanted to pivot back to macro.

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<v Speaker 3>You know, earlier this year, you mentioned in one of

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<v Speaker 3>an interviews that you conducted that the US had just

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<v Speaker 3>started to exit a rolling recession that started back in

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<v Speaker 3>twenty twenty two and was on the path to recovery.

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<v Speaker 3>And of course the FED then went on to cut

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<v Speaker 3>interest rates only last week. In your opinion, were the

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<v Speaker 3>Fed too late to cut interest rates?

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<v Speaker 1>I think there have been signals that the Fed should

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<v Speaker 1>cut interest rates for some time, but there's something else brewing.

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<v Speaker 1>So this rolling recession, we think, is evolving into a

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<v Speaker 1>rolling recovery, and you'll see weakness in employment. A lot

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<v Speaker 1>of that is about productivity. Companies are harnessing AI tools

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<v Speaker 1>and substituting capital for labor, and I think a lot

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<v Speaker 1>of people are going to think that this is another

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<v Speaker 1>sign that we're heading into a deep recession. We do

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<v Speaker 1>not think that's the case. We think that deregulation lower taxes.

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<v Speaker 1>I don't think people understand in the United States. What

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<v Speaker 1>has just happened to corporate tax rates? The rate itself

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<v Speaker 1>has stayed at twenty one percent, but when we incorporate

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<v Speaker 1>accelerated depreciation on structures, equipment, domestic R and D software,

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<v Speaker 1>the effective corporate tax rate in the US could be

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<v Speaker 1>now as low as ten percent. So I hear a

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<v Speaker 1>lot of talk about the dollar's demise and so forth.

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<v Speaker 1>We actually think that the dollar will turn around because

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<v Speaker 1>the return on invested capital in the US, thanks to

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<v Speaker 1>deregulation and tax policies, is going to increase relative to

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<v Speaker 1>the return on invested capital elsewhere. So a little contrarian

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<v Speaker 1>point of view, but that's what we think. And we

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<v Speaker 1>also think this rolling recovery will lead next year into

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<v Speaker 1>an economic boom, a productivity driven economic boom. And I

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<v Speaker 1>think this has been engineered by this administration. Get the

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<v Speaker 1>bad news out of the way as quickly as possible

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<v Speaker 1>because next year is the midterm elections.

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<v Speaker 2>So it's a tax cutting environment, deregulator environment, AI environment

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<v Speaker 2>that boost productivity. And so I mean, this is very

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<v Speaker 2>much what President Trump and the Republican administration believes. Others

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<v Speaker 2>are concerned about it triggering inflation. Are you not concerned

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<v Speaker 2>about that issue.

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<v Speaker 1>If productivity is the reason we're going to see accelerated growth,

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<v Speaker 1>not at all. In fact, productivity is one of the

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<v Speaker 1>most potent anti inflationary forces. We would not be surprised

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<v Speaker 1>to see inflation drop below two percent next year and

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<v Speaker 1>head for zero because we think the productivity gains are

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<v Speaker 1>that profound.

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<v Speaker 3>Let me ask you about the huge kapek spending plans

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<v Speaker 3>that many of the US hyperscalers have. You know, we're

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<v Speaker 3>talking about the hundreds of billions of dollars a year,

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<v Speaker 3>and one company's investment is another company's revenue, as in

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<v Speaker 3>the case of Nvidia. If there starts to be a

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<v Speaker 3>marginal slowdown in just this scale of CAPEX investment, would

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<v Speaker 3>that not mark a turnarounds in terms of just how

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<v Speaker 3>much bullishness there is about the promises of artificial intelligence

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<v Speaker 3>right now?

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<v Speaker 1>Well, I'm I like everyone else are, I'm very surprised

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<v Speaker 1>at how willing these companies are to spend massive amounts

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<v Speaker 1>in this space. But what we're not seeing is all

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<v Speaker 1>the companies who were starting to move into this space

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<v Speaker 1>and have capitulated, and we're down to the big four,

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<v Speaker 1>so Open AI and Thropic XAI and Gemini, which is Google,

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<v Speaker 1>and I think they are moving further ahead. Those are

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<v Speaker 1>the companies who are really spending the markets, are not

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<v Speaker 1>funding as freely the other competitors. I know here in

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<v Speaker 1>Europe that there are a few, so there will be

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<v Speaker 1>regional specific large language models as well, But in terms

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<v Speaker 1>of the global large language models, I think we're down

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<v Speaker 1>to the big four and they are duking it out.

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<v Speaker 1>That's why we're hearing so much about these capital spending plans.

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<v Speaker 1>They're really talking to one another, you know, and willing

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<v Speaker 1>to throw as much capital as possible to leapfrog one another.

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<v Speaker 1>But if you'll notice the performance characteristics of these lms,

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<v Speaker 1>while open ai is still ahead on at the margin,

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<v Speaker 1>the others are getting closer. And one we haven't talked

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<v Speaker 1>about is meta platform. They are, as you know, Mark

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<v Speaker 1>Zuckerboardberg is acqua hiring out of these companies that are

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<v Speaker 1>not going to make it right. So he is attracting

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<v Speaker 1>a lot of capital and is probably going to try

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<v Speaker 1>and get back in the game with his open source strategy.

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<v Speaker 2>What are the opportunities in China? Then, Thus the other

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<v Speaker 2>big stories around deep sea and the huge focus that

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<v Speaker 2>China has on so much of the new technological world,

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<v Speaker 2>but AI in particular, Deep Seek and others. Yes.

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<v Speaker 1>I think President Chichiping directed the economy a couple of

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<v Speaker 1>years ago to new productive forces, and that's all about

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<v Speaker 1>technology and competing aggressively in the technology arena. And we

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<v Speaker 1>think competition is a great thing as long as it's rational.

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<v Speaker 1>And on that score, President gi Giping's discussion about our

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<v Speaker 1>recent pronouncement and his team's pronouncement that they want to

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<v Speaker 1>move away from involution, which means massive commoditization in areas

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<v Speaker 1>like electric vehicles, that is very positive. So is he

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<v Speaker 1>starting to focus on profitability because these companies have to

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<v Speaker 1>spend so much. I think so, and that's a good thing.

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<v Speaker 2>Kathy, thank you so much for being with us. Really

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<v Speaker 2>great to speak to you and hear your views on

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<v Speaker 2>the H one B visa story as well as technological

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<v Speaker 2>advances in China. Kathy Wood is CEO and founder of

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<v Speaker 2>ARC invest. This is going back