Similar to ESG and Greenwashing, firms are overhyping AI to attract new clients and grow their portfolios, capitalizing on the hype around AI to make their offerings seem cutting-edge, even if the actual technology is much simpler. Investors might be more likely to put money into a company perceived as being on the forefront of AI development.

Deceptive Tactics of AI Washing

Marketers may use deceptive tactics, known as AI washing, to inflate the capabilities of their products and services. Here’s how they might mislead you:

• Overpromising Power: They boast about powerful AI models and algorithms, but the reality is far less impressive. These tools may be less flexible or useful than advertised.
• Misusing “Intelligent”: Don’t be fooled by buzzwords. If the software lacks true learning capabilities and relies solely on pre-programmed responses, it’s not truly intelligent.
• Vague Definitions: Look out for marketers who use ambiguous terms about “intelligence” without clearly explaining which parts are actually AI and which rely on traditional methods or human intervention.
• Hiding Human Involvement: They might downplay the significant role of human input, either from the company providing the service or from the users themselves.

SEC Examples

The Securities and Exchange Commission (SEC) cracked down on two investment advisors, Global Predictions Inc. and Delphia (USA) Inc., for misleading investors about their use of artificial intelligence (AI). According to SEC Chair Gary Gensler, these firms “marketed to their clients and prospective clients that they were using AI in certain ways when, in fact, they were not.”

AI Washing and Whistleblowing

Employees who work on AI projects may be more aware of the limitations or lack of true AI present in a product. If they feel pressured to misrepresent the technology’s capabilities they could become whistleblowers and potentially receive an award and protection for their information.