Hype Over Reality: ‘AI Washing’ and Why is it a Problem?
The rapid growth of Artificial Intelligence (AI) has led to an unprecedented wave of innovation, automation, and efficiency across different industries.
Yet behind the AI revolution lurks a dangerous trend: AI washing. This term has jumped into the business world’s vocabulary with a swiftness that should feel familiar.
In this post, we will explore what AI-washing is, how it impacts consumers, and the implications it has for name screening.
What is AI washing?
AI washing is a marketing practice where companies falsely exaggerate or misrepresent the use of artificial intelligence in their products or services, to make it look more sophisticated, innovative or intelligent than it actually is. It’s similar to ‘greenwashing’, where companies falsely claim to be environmentally friendly.
The goal of AI washing is to create a false perception of advanced technology to attract customers and investors, even if the AI involvement is minimal or non-existent.
In other words, AI washing is like painting ‘go-faster’ stripes on a car without upgrading the engine, letting marketers capitalize on the excitement around AI while not offering anything genuinely revolutionary.
AI washing: Spotting the fakes
AI washing, or misleading AI claims, can be a hard nut to crack, especially when you are not from a technical background. However, here are a few tips that you can follow to spot AI washing at first sight.
– Vague claims:
If a company or a vendor puts around terms like ‘AI-powered’ without explaining how it’s used, be suspicious.
– No evidence:
If the company doesn’t have any evidence to support its exaggerated claims to be top-notch in the industry, it’s a red flag.
– Unrealistic expectations:
Be cautious of vendors/organizations that claim their AI can do everything. AI is powerful, but it’s not a magic tool.
– No proof of performance: zero progress:
If an AI doesn’t improve over time, it will likely be an AI washing tool. Real AI learns, adapts, and upgrades with time.
Vetting companies/vendors that claim to use AI can be time-consuming. However, simple things, such as doing research on the internet, can help you uncover valuable insights into an vendor’s profile.
One can delve into the company’s details and offerings and compare them to similar products or services from other vendors. This can help identify if the AI claims are genuine or simply marketing hype.
Consequences of AI washing
While AI washing may seem like harmless hyperbole, it could have far-reaching consequences for consumers as well as the tech industry itself. Here are a few things to note:
– Can stifle or obscure true innovation
Exaggerating or misrepresenting AI can stifle or obscure true innovation. It can create a cluttered marketplace where true AI innovation struggles to stand out against the tide of false claims.
– Erode consumer trust in AI
The fake labelling can also erode consumers’ trust in AI. It could damage the overall perception of AI and make it harder to build trust in the technology. Moreover, users become cynical about claims made by the industry or the company.
– Loss for stakeholders
Investors may find themselves paying for or investing in services that are highly overvalued due to buzzwords and misleading statements. As a result, it can lead to missed opportunities for other projects that can offer real technological advances and value to the market.
– Unrealistic goals
It can also lead to inflated expectations about what AI is currently capable of achieving, which could result in businesses setting unrealistic goals and targets.
Artificial intelligence: A popular—and fuzzy—label: Examples of AI Washing
Coca Cola
Coca-Cola was accused of AI washing for a campaign claiming it had used AI to create a new drink. The company said, “For the first time, Coca-Cola Y3000 was co-created with artificial intelligence to help bring the flavor of tomorrow to Coke fans.”
However, there was no real explanation of how AI was involved in the drink-making process. Some critics pointed out that it seemed to be name-dropping AI to make the product seem more innovative than it actually was.
McDonald’s
In 2021, the fast-food giant partnered with IBM to test-run the AI ordering technology at over 100 McDonald’s locations. The goal of the test was to determine if an automated voice ordering solution could simplify operations for the crew and create a faster, improved experience.
But later in June 2024, McDonald ended its AI experiment with IBM. The reason? A slew of social media videos showing confused and frustrated customers trying to get the AI to understand their orders.
One video in particular featured two people repeatedly pleading with the AI to stop as it kept adding more Chicken McNuggets to their order, eventually reaching 260.
After many such mishaps and incidents, the fast-food giant decided to take a pause on its AI approach.
FTC warns companies about false AI claims
With so many companies claiming to use artificial intelligence, the Federal Trade Commission (FTC)has stepped in, warning that it’s watching for false promises.
The Federal Trade Commission (FTC) released a blog post advising organizations to monitor their claims regarding their use of AI. According to the agency, companies relying (or purporting to rely) on AI can get themselves in trouble with the FTC – because of over exaggerating the claims of their products, overpromising and underdelivering, and not properly accounting for reasonably foreseeable risks to consumers.
The FTC has made it clear that the agency is closely watching how the developments with this technology play out and that it will not hesitate to use its enforcement authority to penalize conduct it views as unfair or deceptive.
Likewise, the FTC has specifically advised companies to ensure that they are being transparent regarding how their AI products work and what the technology can do.
Michael Atleson, an attorney for the FTC’s division on advertising practices, wrote in a blog post that “AI has become a ‘hot marketing’ term that some companies, won’t be able to stop themselves from overusing and abusing.”
“Marketers should know that — for FTC enforcement purposes — false or unsubstantiated claims about a product’s efficacy are our bread and butter,” the regulator said. “You don’t need a machine to predict what the FTC might do when those claims are unsupported.”
What prominent leaders have to say about AI washing?
Given the trend, many leaders are expressing concerns about AI washing, where companies falsely or misleadingly hype their AI capabilities to attract investors.
John Fitzpatrick, (CTO of Nitro) says:
“AI-washing has become pervasive. Companies exaggerate or misrepresent AI capabilities, often rebranding existing business logic or adding superficial integrations that add minimal real value. We also see this on the people side, with many consultants and IT services rebranding themselves as AI experts despite lacking genuine AI expertise or a track record of shipping AI products”.
David Shargel, a regulatory compliance lawyer with law firm Bracewell claims that:
“With the current AI gold rush, companies may be tempted to exaggerate their AI implementations to lure investors and customers, a practice called ‘AI washing’, but they should think twice before doing so.
“AI washing is a new phenomenon, but it’s really just a different kind of fraud. Companies always commit fraud, and they’ll find new ways to do it, based on new technology.”
Gary Gensler (the 33rd Chair of the U.S. Securities and Exchange Commission from April 17, 2021, through January 20, 2025), claims that:
“Everyone may be talking about AI, but when it comes to investment advisers, broker dealers, and public companies, they should make sure that what they say to investors is true”.
According to Jonathan Cohen, Chief Investment Officer of Robocap, almost a third of the companies that he meets, both public and private, claim to have AI without true AI capabilities. He says:
“They might have an algorithm, but they don’t have machine learning, and they don’t have neural networks. There is a lot of hype, with ‘AI washing’ going on, which is a bigger problem than greenwashing.”
“In some cases, you have startups that claim to have an AI because that’s the only way of raising money from venture capital, but they don’t have the AI yet. They haven’t figured out how to integrate AI.”
What future does it hold?
Nothing worthy. Only true innovators, whether an organization or a professional, will sustain themselves. The real ones stand out in the long run. However, those who continue to favor AI washing will see the effect in the future since they don’t have true potential.
As seen in the past, from greenwashing to the dot-com bubble, there’s a price to pay when hype gets ahead of reality. The companies that thrive in the AI era will be the ones that stay grounded, embrace the complexity of the technology, and make choices that prioritize real value over short-term wins. They will reap the real rewards of AI—the trust of their customers, investors, and employees.
Leadership isn’t just about being first to market—it’s about having the courage to say, “We’re not there yet,” and still pushing forward, responsibly.
In brief:
As AI gains momentum, it poses to become a major problem, with many companies/vendors falsely claiming to leverage AI in their offerings. This trend makes it difficult to distinguish between genuine AI advancements and the marketing hype.
At the same time, it is creating challenges for investors and consumers who struggle to identify which companies are truly driving AI innovation. For the ecosystem to thrive, transparency in products and services must become a core value. In a nutshell, companies must focus on their core value proposition rather than chasing AI trends.
