Introduction
Artificial intelligence has changed industries and is now looking to turn science fiction into reality. However, all this hype has led us to AI-washing—the deceptive marketing term that will call every product AI-driven when they are anything but. While companies may think they’re pulling a fast one, customers are increasingly wary of the “AI” label being thrown around all too freely. When it comes to AI-washing, common sense often proves to be the best defense.
Buyers with critical thinking skills and the ability to ask the right questions are much more likely to spot the difference between real AI and inflated claims.
Healthcare Risks: The Theranos Effect
AI is said to be the game-changer in medical diagnosis and treatment, but AI-washing in healthcare can lead to devastating outcomes. One of the most infamous cases of healthcare deception has been the Theranos scandal. Ms. Holmes managed to dupe the world by claiming that she invented AI-driven blood-testing technology that could diagnose multiple diseases through just drops of blood. Investors, doctors, and patients were amazed by promises made, but as it eventually happened, the technology behind it wasn’t effective.
This scandal tells us exactly how badly things can go wrong when AI-washing—or tech-washing in general—happens. For those patients who relied on such faulty test results, it meant misdiagnoses, delayed treatments, and undue anxiety over false positives in a few cases. Take- away lesson? When it comes to healthcare, false claims about AI or advanced technology can have life-and-death or life-altering effects.
Financial Loss: The Big Short Effect
AI is applied in financial market prediction, fraud detection, and personal investment advice. However, when firms stretch the claims of what an AI system can do too far, people lose their money. One good example was the 2007-2008 financial crisis due to the United States housing bubble explained best, of course, by the movie The Big Short. We know how mortgage-backed securities were presented as low-risk investments, and though this may not be AI-related, it proves that complex systems can be misrepresented to customers who don’t understand the technical jargon.
Today, financial AI-washing can do as much damage or more. Companies can claim the abilities of their AI-financial tools as entirely unbreakable ways to predict market trends or secure investments, but those underlying systems may well rely on simple models or be cobbled together from manual inputs—which means customers are being sold dangerous guesses. Just as in that financial crisis, overpromising meant huge losses in the pocketbook.
Public Safety in Autonomous Vehicles: Elon Musk’s Robotaxi and Robovan
The autonomous vehicle industry has been filled with promises, like Elon Musk’s Robotaxi and Robovan. While Musk’s vision is compelling, companies must ensure transparency by providing clear testing results and engaging with regulatory bodies for validation before deploying AVs on a large scale. Customers should stay informed and critical of the hype, demanding information about the vehicles’ limitations and capabilities before fully trusting them on the road.
Fines for AI-Washing: Legal Consequences of Misleading Claims
As AI-washing becomes more prevalent, regulators are cracking down on deceptive practices. Companies that engage in AI-washing can face significant fines:
- False Advertising Fines: Firms that mislead consumers can face penalties under consumer protection laws.
- AI Compliance Violations: In the EU, companies that falsely label products as AI-powered could face fines of up to €30 million or 6% of global annual revenue.
- Class-Action Lawsuits: Misleading AI claims can lead to lawsuits from customers who feel
In sectors like finance and healthcare, regulators are paying particular attention, with severe consequences for misleading AI claims.
Management Implications and Long-Term Strategies
Companies looking to avoid AI-washing should take a long-term strategic approach. This includes aligning AI goals with ethical frameworks and transparent communication. Leaders must ensure they have interdisciplinary teams (legal, ethical, and technical experts) that continuously assess the validity of AI claims, ensuring they are both practical and ethically sound.
Companies like IBM and Microsoft have had some success in marketing their AI products ethically by being transparent about AI limitations and involving cross-functional teams to validate AI outcomes.
Ethical and Legal Frameworks
With growing concerns around AI ethics, businesses must align their marketing practices with legal frameworks like the EU AI Act, which outlines stringent regulations against AI-washing. Ethical marketing practices must focus on transparency, educating consumers about the limitations and capabilities of AI products. Misleading claims not only invite legal consequences but also risk long-term brand damage.
Companies bear a responsibility to prevent harm—whether financial, physical, or emotional— stemming from inflated AI claims.
Why Common Sense Trumps AI-Washing
In the face of AI hype, buyers and customers can arm themselves with something much more powerful than the fanciest algorithm: common sense. Here are a few simple guidelines:
- AI Is Not a Magic Wand No AI system can do everything, and true AI solutions are usually very specific to their Where a product claims to solve a wide range of problems with AI—especially if it promises to do so perfectly—it’s time to pause. Common sense tells us that no technology, AI or otherwise, can be universally perfect, and that over-promising is a hallmark of AI-washing.
- Ask the Right Questions It’s easy to get caught up in buzzwords, but smart buyers should ask companies about specifics:
- What exactly does the AI do?
- How was the AI system trained?
- What data does it rely on to make its predictions or decisions?
- What are the limitations?
If the company can’t give direct, simple answers or if the explanations they offer are jargon-filled, it’s a red flag.
- Look for Proven Results Third-party and regulatory body testing and validation should be a requirement of real AI systems. Companies claiming their AI technology boasts significant claims should be able to produce case studies or peer-reviewed research or have appropriate certification supporting that technology. If these things can’t be produced easily, then it should raise skepticism. There’s no way someone wouldn’t provide proof of claims, especially something as powerful as AI.
- Watch out for “AI-Washing” Buzzwords When the marketing copy of a product reads like a laundry list of buzzwords—machine learning, deep learning, neural networks—but goes very light on how these techniques are applied to solve a specific business problem or meet a need, it’s probably AI-washing. Common sense will cut through a lot of the verbiage. Real AI solutions have explanations of how they work without the need for overwhelming jargon.
How Buyers Can Protect Themselves from AI-Washing
Not only good sense, but steps can be taken by buyers and customers to protect themselves against AI-washing:
- Education about AI: The basic ideas about AI technology would go a long way for you. You don’t have to be a subject matter expert, but knowing how AI works, what machine learning is, or what deep learning means can help you flag when a company’s claims are overhyping the technique.
- Independent Reviews: The AI solution can be bought into only after independent reviews from credible sources or third-party validators have been Independent reviews give you a better sense of whether the product is really delivering what it promises.
- Read the Fine Print: The fine print of an AI product by any company that produces it will often imply the limitations of that particular product. This, in turn, will ensure that one reads through the disclaimers and terms and conditions of a product to understand what can and cannot be done with it.
- Request Demonstrations: If you are contemplating an AI solution for your business, request that the firm provide a live demonstration or a proof of This will allow you to see your AI in action and come to your own conclusion as to whether it does everything you need it to do.
Conclusion: Trust Your Instincts
AI-washing is a growing issue, but by applying skepticism and using common sense, buyers can protect themselves. As AI continues to evolve, distinguishing genuine innovations from exaggerated claims will be key to making informed decisions. For companies, ethical AI marketing is not just a legal requirement—it’s the foundation for long-term trust and success.
About the Author
Roopa Prabhakar, holds a Master’s degree in Electrical and Computer Engineering and a bachelors in Electronics and Communication Engineering. She has over 20 years of experience in data & analytics and currently serves as a Global Business Insights Leader at Randstad Digital. She specializes in modernizing & migrating legacy technology towards AI-enabled systems, bridging traditional IT roles with AI-powered functions. As an independent researcher, Roopa focuses on gender bias in AI, informed by works from UN Women and the World Economic Forum.
