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News, the tech run up that we've seen in terms of stocks, and this of course after the FED and its first rate cut of the year last week, and the inflation data that we get out on Friday. Joining us now is CEO and founder of ARC invest Kathy Would. Good morning, Kathy, So you've hot footed it from our TV studio into the REJO studio. We really appreciate your time and we want to start on the H one
B visa change with President Donald Trump. It seems that he has sided with magas anti immigration wing rather than the tech executives that we saw him dining with only a few weeks ago. How much of a concern is it to you in terms of limiting those high skill tech employees tech workers for some of the big names that you invested in.
Yes, well, I think this is part of a much broader negotiation, particularly with India. In mind, those negotiations have not finished, and of course this is very important to India. I think that our tech executives understand that this is a part of a broader negotiation. I think the suddenness the Friday announcement and the lack of clarity through a
lot of people, including US. The clarity now is this applies only to new H one B visas, So I think longer term, this administration has said that it is very interested in bringing foreigners who have been educated in the US into the US workforce, and I think longer term, that's that's the way we should think about that.
So you see a change coming. This is punishment for India, and the impacts on the US is a side effect that will change.
It's a negotiation negotiation with India. Longer term. I think President Trump and his team want to keep as much innovation talent, technology talent as possible in the US.
Can I just ask you long term though, given the Trump administration wants to keep as much talent, you also have other countries raising the possibility of their own form of golden visas, perhaps seeing this as an opportunity to attract the same high skilled talent to their own countries. Could there be longer term ramifications if this H one B visa application fee does actually stay the higher fee.
Sure, I think this is I call this regulatory arbitrage. Other companies countries should be looking at this as an opportunity to attract the best and the brightest. As I said, I don't think this is long term for the United States, but sees the moment.
Okay, that's interesting that this is Yeah, Jermanica ahead, So yeah.
No, no, I just wanted to pivot back to macro. You know, earlier this year, you mentioned in one of an interviews that you conducted that the US had just started to exit a rolling recession that started back in twenty twenty two and was on the path to recovery. And of course the FED then went on to cut interest rates only last week. In your opinion, were the Fed too late to cut interest rates?
I think there have been signals that the Fed should cut interest rates for some time, but there's something else brewing. So this rolling recession, we think, is evolving into a rolling recovery, and you'll see weakness in employment. A lot of that is about productivity. Companies are harnessing AI tools and substituting capital for labor, and I think a lot of people are going to think that this is another sign that we're heading into a deep recession. We do
not think that's the case. We think that deregulation lower taxes. I don't think people understand in the United States. What has just happened to corporate tax rates? The rate itself has stayed at twenty one percent, but when we incorporate accelerated depreciation on structures, equipment, domestic R and D software, the effective corporate tax rate in the US could be now as low as ten percent. So I hear a lot of talk about the dollar's demise and so forth.
We actually think that the dollar will turn around because the return on invested capital in the US, thanks to deregulation and tax policies, is going to increase relative to the return on invested capital elsewhere. So a little contrarian point of view, but that's what we think. And we also think this rolling recovery will lead next year into an economic boom, a productivity driven economic boom. And I
think this has been engineered by this administration. Get the bad news out of the way as quickly as possible because next year is the midterm elections.
So it's a tax cutting environment, deregulator environment, AI environment that boost productivity. And so I mean, this is very much what President Trump and the Republican administration believes. Others are concerned about it triggering inflation. Are you not concerned about that issue.
If productivity is the reason we're going to see accelerated growth, not at all. In fact, productivity is one of the most potent anti inflationary forces. We would not be surprised to see inflation drop below two percent next year and head for zero because we think the productivity gains are that profound.
Let me ask you about the huge kapek spending plans that many of the US hyperscalers have. You know, we're talking about the hundreds of billions of dollars a year, and one company's investment is another company's revenue, as in the case of Nvidia. If there starts to be a marginal slowdown in just this scale of CAPEX investment, would that not mark a turnarounds in terms of just how much bullishness there is about the promises of artificial intelligence right now?
Well, I'm I like everyone else are, I'm very surprised at how willing these companies are to spend massive amounts in this space. But what we're not seeing is all the companies who were starting to move into this space and have capitulated, and we're down to the big four, so Open AI and Thropic XAI and Gemini, which is Google, and I think they are moving further ahead. Those are the companies who are really spending the markets, are not
funding as freely the other competitors. I know here in Europe that there are a few, so there will be regional specific large language models as well, But in terms of the global large language models, I think we're down to the big four and they are duking it out. That's why we're hearing so much about these capital spending plans. They're really talking to one another, you know, and willing to throw as much capital as possible to leapfrog one another.
But if you'll notice the performance characteristics of these lms, while open ai is still ahead on at the margin, the others are getting closer. And one we haven't talked about is meta platform. They are, as you know, Mark Zuckerboardberg is acqua hiring out of these companies that are not going to make it right. So he is attracting a lot of capital and is probably going to try and get back in the game with his open source strategy.
What are the opportunities in China? Then, Thus the other big stories around deep sea and the huge focus that China has on so much of the new technological world, but AI in particular, Deep Seek and others. Yes.
I think President Chichiping directed the economy a couple of years ago to new productive forces, and that's all about technology and competing aggressively in the technology arena. And we think competition is a great thing as long as it's rational. And on that score, President gi Giping's discussion about our recent pronouncement and his team's pronouncement that they want to move away from involution, which means massive commoditization in areas
like electric vehicles, that is very positive. So is he starting to focus on profitability because these companies have to spend so much. I think so, and that's a good thing.
Kathy, thank you so much for being with us. Really great to speak to you and hear your views on the H one B visa story as well as technological advances in China. Kathy Wood is CEO and founder of ARC invest. This is going back