You might be wondering that we barely got to wrap our heads around green washing, where company sells a product based on its 'environment' friendly claims, when in reality that is not the case....
Now what the heck is this AI Washing?
Well two separate incidents highlighted the AI washing in recent past and one of them is associated with Hindenburg Research. Let us see both:
1. Hindenburg Research published a report accusing Equinix, a US multinational firm which operates colocation data centers with account manipulation. It claims that Equinix is valuation is at premium compared to its peers and Equinix achieved this with account manipulation.
There was one more aspect to this report where Hindenburg Research claims that Equinix has attributed this growth to its positioning with respect to recent AI boom. They (Hindenburg Research) also highlight that Equinix current infrastructure is far from ready to support AI boom (Feel free to read the report to know more about the case in detail, the above is an extremely condensed version of the case to drive the point across)
On a completely unrelated incident but around same time, SEC charged two investment advisors with a fine of USD 4,00,000 for making false and misleading statements about their AI capabilities.
One of the firms, Delphia (USA) Inc claims that it puts data to work to make their artificial intelligence smarter so that it can predict which companies and trends are about to make it big and invest in them before everyone else. This was false as Delphia did not own any Ai capabilities to support the above statement which violates the marketing rule of disseminating any advertisement that includes any untrue statement of material fact.
The other firm, Global Predictions Inc, adverts itself as ‘first regulated AI financial advisor’ which SEC finds incorrect and charged the firm guilty of violating the same marketing rule!
Both these above incidents highlights companies selling their products/services powered by AI, when in fact, that is not the case. This is known as AI Washing.
SEC Chair Gary Gensler said, and I quote:
“We’ve seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies. Investment advisers should not mislead the public by saying they are using an AI model when they are not. Such AI washing hurts investors.”
However, this type of phenomenon is not new. In fact, this is history repeating itself, just this time with new technology that has hyped the market.
It started in 1920s when the hype was around airlines and people went gaga over investing in airline companies.
FunFact: One such company was Seaboard Air Line, only later to realize that the company is in railroad business.
Same thing happened in dot com bubble burst during 2000s where investors poured crazy money into internet companies.
According to Goldman Sachs Report, AI to attract USD 200 billion in investment by 2025.
Is AI also another bubble or the valuation it commands is genuine? Well, that will unfold with time, however what is true that AI does have capabilities and the power to change lives, but investors need to separate the wheat from the chaff!
