‘AI washing’ taking investors everywhere for a bath

Staying competitive in the finance sector is vital, with many companies moving quickly to adopt artificial intelligence (AI) to reduce costs and streamline operations.

But two companies recently came unstuck when the United States Securities and Exchange Commission (SEC) accused them of exaggerating their use of AI, marking the world’s first significant move in combating so-called “AI washing.”

Delphia (USA) Inc and Global Predictions Inc boasted about using AI for designing investment strategies, but the SEC found their claims to be unsubstantiated.

There’s much speculation around AI, especially with generative technology app ChatGPT shaking things up. But amid all the hype, AI washing is becoming more common.

As well as exaggerating or misrepresenting their AI capabilities, companies may inflate the abilities of AI algorithms or create the illusion AI plays a more significant role than it actually does.

Incorporating AI into business operations has many benefits. It can streamline processes, quickly break down and analyze complex data to speed up decision-making and help organizations stay ahead in a rapidly evolving and competitive market.

Promoting its use of AI helps portray a company as high-tech and cutting-edge, even if the reality doesn’t check out.

The practice of AI washing isn’t totally new. It follows the same idea as greenwashing, where companies pretend to be eco-friendly to attract investors and consumers.

It involves dressing up ordinary tech with fancy AI buzzwords such as “machine learning”, “neural networks”, “deep learning” and “natural language” processing to seem more innovative than they actually are.

AI and the finance sector

AI washing flourishes in finance and investment because of the