In recent years, the rise of artificial intelligence (AI) has sparked excitement and innovation across various industries. However, this enthusiasm has also led to a troubling trend known as “AI washing,” where companies exaggerate or falsely claim the capabilities of their AI technologies. AI is a rapidly developing technology whose capabilities and limitations are not fully grasped by the investing public. This allows some companies to over-hype the ways in
which AI can assist their business.
This deceptive practice is particularly impactful in the world of investments, where it can lead to securities fraud. As a result, investors are increasingly turning to class action lawsuits to hold companies accountable for misleading claims about the impact AI has on their business.
How AI Washing Leads to Securities Fraud
When companies engage in AI washing, they risk committing securities fraud. This happens when they provide false information that misleads investors, causing them to make decisions based on inaccurate data.
If the truth about the AI technology is revealed, the company’s stock price can plummet, leading to significant financial losses for investors. For example, Innodata, a data engineering company, faced allegations of misleading investors about the capabilities of its AI platform, Goldengate. After these allegations were made, Innodata stock dropped approximately 30% and securities fraud lawsuits followed.
Investors’ Response: Class Action Lawsuits
Many have responded to AI washing by filing class action lawsuits against companies accused of misleading them about their AI technologies. These lawsuits aim to cover incurred losses because of these companies’ deceptive practices.
This scenario has become increasingly common, with the number of AI-related securities class action filings more than doubling from 2023 to 2024.
The Importance of Legal Help
For investors who suspect they have been misled by AI washing, seeking legal help is crucial. Experienced securities fraud attorneys can provide guidance on whether a lawsuit is warranted and help navigate the complex legal process. When a lawsuit is appropriate, these attorneys can also assist in gathering evidence and building a strong case to increase the chances of a successful outcome.
AI washing poses a significant risk to investors, as it can lead to securities fraud.