What is AI Washing?

Earlier this year the U.S. Securities Exchange Commission (SEC) fined two companies for engaging in Artificial Intelligence (AI) Washing. The two companies were fined a combined $400,000 for the making false and misleading statements about their purported use of AI.

Recently AI has been all over the news and talked about online through articles, blogs, social media, and forums. You may have seen articles and posts that were purportedly written by AI. This buzz and interest in AI have led to the SEC cracking down on AI Washing.

AI Washing is when a company makes false, misleading or exaggerated claims about its use of AI in its products or services, to capitalize on the hype around the technology. It is similar to greenwashing, which is when companies make exaggerated or false claims about eco-friendly initiatives to tout a fraudulent environmental record and appear more appealing to ESG investors.

Last month we published a blog post on AI and investing to alert investors to some of the warning signs to watch for when using AI to invest. AI Washing should also be on investors’ watch lists, as AI continues to generate tremendous hype especially among tech companies.

The two fines handed out by the SEC for AI Washing may just be the start. If you’re interested in investing with or in a company that is touting “AI breakthroughs” or “new uses for AI technology”, do your due diligence and research before making any investment.