Cathie Wood doesn't hold much back in her views about Nvidia (NVDA 3.64%) these days. She has stated several times that the stock is too highly valued. While Nvidia remains in her Ark Invest portfolio, Wood has sold much of the previously large stake this year.

On Wednesday, Wood talked about investing in artificial intelligence (AI) on CNBC's Squawk Box Europe program. She stated in the interview that there "might be a little bit too much emphasis on AI" with one chip stock. Surprisingly, it's not Nvidia.

Arm is overrated for AI

Wood didn't buy into the hype leading up to the initial public offering (IPO) for Arm Holdings (ARM 3.93%) last week. Arm traded publicly in the past but was taken private by Japanese investment company SoftBank in 2016 for $32 billion. Roughly seven years later, SoftBank saw an opportunity to profit from its purchase by taking Arm public again.

The profits from Arm's IPO were huge -- at first. Share prices of the chipmaker popped nearly 25% on its first day of trading on Sept. 14. But the party didn't last long. Arm stock is down close to 20% over the last few days.

In her remarks earlier this week on Squawk Box Europe, Wood mentioned two reservations she has about Arm. One echoed her main concern with Nvidia. She stated, "Arm came out, we think, from a valuation point of view on the high side." 

Wood's other problem with Arm is that its growth prospects might not be as great as some think. After making the comment about "too much emphasis on AI" with the chipmaker, she added there is "maybe not enough focus on the competitive dynamics out there."

Arm dominates the chip market for smartphones. However, it hasn't been a significant player in AI, at least so far. 

What's not overrated is the potential of AI

It's important to understand that Wood isn't saying that investors are placing too much emphasis on AI in general. She clearly doesn't think that AI is overrated. 

Wood told CNBC that "innovation is undervalued, given the enormous opportunities that we see ahead, catalyzed very importantly by artificial intelligence." Although she thinks that Arm is overvalued, the Ark Invest founder said that her funds own much lower-priced names with much more exposure to AI.

Ark isn't just looking at U.S. companies. She noted, "The cost of technology, especially with artificial intelligence now, is collapsing, and therefore it's going to be much easier to build and scale tech companies anywhere in the world."

A quick look at Ark Invest's combined portfolio across all of its exchange-traded funds shows just how much Wood believes in the potential for AI. Two of Ark's top three holdings -- Tesla and UiPath -- are AI stocks.

Is Wood right?

Wood argues that Arm stock is overvalued and investors are overestimating the chipmaker's AI opportunity. But is she right?

There's no question that Wood is spot on about Arm's valuation. Even after its post-IPO decline, Arm stock trades at more than 55x forward earnings. That's even higher than Nvidia's forward earnings multiple of nearly 40x.

As for Arm's AI prospects, there are two different stories to follow. It seems unlikely that AI will provide a massive tailwind for Arm in the near term. For now, the primary area of growth for AI is in data centers, where Nvidia's chips dominate the market. Over the longer term (beyond the next five years), though, it's not hard to envision AI processing shifting more to mobile devices. Arm could be a major AI winner in that scenario.

I'm in 100% agreement with Wood about the overall future of AI technology. For investors with long-term perspectives, my hunch is that more rather than less emphasis on AI is the best approach.