Surging investments in AI raise risks of ‘AI washing’

By the Editorial Team · Monday, August 3, 2026

U.S. companies are expected to invest $7.6 trillion in AI infrastructure by 2031, but many firms are engaging in "AI washing" by overstating their AI involvement to boost valuations without substantial technological backing. This trend highlights the need for investors to differentiate between genuine AI innovation and marketing hype, emphasizing thorough evaluation of companies’ true AI capabilities.

Investment in artificial intelligence (AI) is experiencing rapid growth, with U.S. companies projected to spend approximately US$7.6 trillion on AI-related infrastructure by 2031, according to a recent Goldman Sachs Global Institute study. This surge in capital is accompanied by concerns over “AI washing,” a phenomenon where companies label themselves as AI-driven without substantive technological grounding.

Since 2023, a diverse group of firms—spanning industries such as gold mining, cancer treatment, and footwear—have rebranded as AI companies, initially boosting their combined market valuations by about US$8.7 billion. However, this uplift has often proven fleeting, with some firms now valued lower than prior to their AI rebranding.

Peter Hofstra, senior vice-president and co-head of equities research at CI Global Asset Management, attributes AI washing to several underlying factors. He notes that while many enterprises genuinely engage with AI technology, the hype can be amplified by financial motivations, such as raising stock prices or securing funding. “AI washing” functions as a marketing strategy, driven in part by the broad and somewhat ambiguous definition of artificial intelligence, which can encompass any non-biological process that appears intelligent, even deterministic programming.

Compounding the issue, there is a knowledge gap regarding AI among company leadership. An analysis of first-quarter earnings calls revealed that executives at 337 S&P 500 companies referenced AI; however, the AI-Driven Enterprise Institute found that board members and executives generally lack sufficient AI literacy. This deficiency may lead to overstated claims rather than intentional deception, as corporate leaders navigate rapid technological changes while pursuing financial incentives tied to AI narratives.

Mickey Ganguly, associate portfolio manager at CIBC Global Asset Management, highlighted several indicators of exaggerated AI claims. These include senior executives’ inability to explain their company’s AI use, legacy technology firms suddenly branding themselves as AI companies without corresponding increases in research and development spending, and assertions of proprietary data that merely consist of customer data without meaningful insights. Sectors such as enterprise software are particularly susceptible to AI washing due to their reliance on data for targeted services.

Ganguly favors investment in companies like Alphabet Inc. and Meta Platforms Inc., which demonstrate substantial AI investments and sustained growth, making “AI washing” less of a concern. He manages a focused portfolio of technology stocks in which he has high conviction, emphasizing the importance of genuine AI capabilities.

Hofstra advises investors to carefully evaluate whether firms truly possess innovative AI applications or are merely attempting to capitalize on market trends. He advocates prioritizing companies with proprietary data that leverage AI to deliver actionable insights to clients, citing examples ranging from large-cap tech firms to smaller companies analyzing medical metadata to understand placebo effects.

While the potential economic value of authentic AI-driven businesses is significant, experts caution investors to proceed with vigilance due to the fast-evolving and complex nature of AI development.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.