PYMNTS MonitorEdge May 2024

Tech Firms Caution Investors About AI-Related Risks

AI Investments, artificial intelligence

A growing number of tech firms are reportedly cautioning investors about risks related to their efforts in artificial intelligence (AI).

At least a dozen major tech companies have “quietly” issued AI-related warnings this year by adding or updating them in the “risk factors” section of reports filed with the Securities and Exchange Commission (SEC), Bloomberg reported Wednesday (July 3).

In this section of the reports, where companies issue warnings in hopes of preventing potential lawsuits should anything go wrong, AI-related risks are now listed along with issues like climate change, wars and the fallout from bank failures, according to the report.

Examples include Meta warning that it could face a backlash if its AI tools are used to create misinformation during elections; Microsoft saying it could face claims of copyright infringement related to its AI training and output; Oracle saying it could turn out that is AI products may not work as well as those of competitors; Google saying it could face financial damage if its AI tools are used to harm human rights or other social concerns; and Adobe saying that the adoption of AI could reduce demand for its existing software products like Photoshop, per the report.

While risk factors don’t have to be likely to be included in these reports, they sometimes do come true, the report said. For example, AI chipmaker Nvidia has warned since early 2023 that restrictions could be placed on its products. Later in the year, the Biden Administration announced efforts to restrict the export of advanced chips to China.

This news comes on the same day that it was reported that major investments in AI firms largely fueled a 47% increase in venture capital (VC) investments in the second quarter.

That total marked a two-year high in American venture funding, and it was largely accomplished thanks to AI.

The report of AI-related risk factors also comes a day after Federal Reserve Chair Jerome Powell said that the Fed is investigating possible effects generative AI may have on productivity, inflation and the labor market.

It’s too early to tell whether the adoption of this technology will eliminate jobs, augment existing jobs or create new ones, Powell said.

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