‘AI washing’: firms are scrambling to rebrand themselves as tech-focused

AI washing companies are jacking up share prices with tech rebranding claims

Sarah Mills | GlobalBeat

Peloton’s $247 million quarterly loss triggered a 21% share rally after executives dropped “fitness platform” and called the bike-maker an “AI-driven health technology company.”

The language swap happened 30 minutes into Peloton’s earnings call on May 22, accelerating a trading day that saw 70 million shares change hands, triple the normal volume.

Start-ups and legacy firms are rewriting investor decks overnight to escape low valuations tied to traditional sectors. Lawncare operator BrightView Holdings now bills itself as “AI-powered precision landscape management,” though its workers still push gas mowers. Vineyard owner Vintage Wine Estates rebranded to “predictive agriculture platform,” sending the penny stock up 82% in three sessions before trading was halted.

SEC chair Gurbir Grewal warned on May 15 that the agency “has opened dozens of inquiries into questionable AI capability disclosures” and promised enforcement actions before August recess. The regulator’s accounting division flagged 28 filings this quarter where firms claimed to use “proprietary machine-learning algorithms” without describing data sources, training costs, or risk factors.

Marketing departments are following a playbook drafted by the legal team at CarParts.com. Internal emails, revealed in a shareholder suit filed in Delaware on May 20, instructed staff to “replace every instance of ‘warehouse’ with ‘AI fulfilment node’ and every ‘call-centre’ with ‘generative-language interface.’” The auto-parts retailer’s stock doubled between March 10 and April 25, adding $650 million in market value.

Investment banks are feeding the frenzy. Goldman Sachs distributed a client note on May 18 headlined “AI Wrapper Premium Worth 4-6× Sales,” advising boards to “repackage legacy services as AI-enabled.” JPMorgan’s equity desk circulated a list of 200 small-caps that could “capture the multiple bump” with minimal product changes, according to a document seen by GlobalBeat.

Fund managers privately admit the trade is crowded. “We’re long pure-play jokes,” a Boston hedge-fund partner told reporters on condition of anonymity. “Buy before the press release, exit before the 10-K reveals the AI is an Excel macro.”

The phenomenon is global. In Shenzhen, toy company Alpha Group added “intelligent robotics” to its registration filing and saw its ChiNext valuation surge $1.1 billion despite admitting no autonomous function beyond voice chips bought from iFlytek. Paris-listed waste collector Veolia tried “AI-optimized collection matrices,” prompting a 7% single-day pop before analysts noted the phrase described existing route-mapping software from 2019.

Regulators outside the United States are reacting faster. Britain’s Financial Conduct Authority forced plant-hire firm Ashtead Group on May 12 to withdraw a promotional slide that promised “AI fleet health prediction,” issuing a public censure and fining the company £890,000 for misleading forward guidance. South Korea’s financial supervisor banned block trades in 11 small caps on May 19 after their combined market cap rose 240% on buzzword-laden releases.

Academics tracking corporate filings see an acceleration curve. Researchers at MIT’s Sloan School counted 4,200 AI mentions in U.S. quarterly statements filed since January, topping the 3,800 seen in all of 2025. Professor Beltran Mejia, who co-authored an April working paper on the trend, said the median firm adds 23 basis points to its price-to-sales ratio each time the word “generative” appears in regulatory text.

Lobbyists are pressuring lawmakers to leave space for “aspirational language.” TechNet, a trade group whose members include Google and Microsoft, argued in a May 21 letter to House committees that “semantic flexibility encourages innovation” and warned that SEC overreach could “chill American AI leadership.” The letter did not mention that Google and Microsoft already face civil subpoenas over statements made to investors regarding their own AI capabilities.

Labor unions smell political opportunity. The Communications Workers of America launched a website on May 22 where call-centre employees can report “AI washing by employers” if management claims chatbots will replace staff without evidence. The union plans to present affidavits to the Federal Trade Commission in July, arguing that hyped automation claims suppress wages and violate federal labor standards on truthful workplace communication.

Even auditing firms are conflicted. EY markets a service called “Intelligent AI Disclosure Check” that helps clients reword filings to “eliminate regulatory friction,” charging up to $2 million per engagement. The same firm’s assurance partners then sign off on those disclosures, raising independence questions flagged by the Public Company Accounting Oversight Board in a May 10 oversight brief.

Background

AI washing mirrors previous tech hype cycles. During the dot-com boom of 1999-2000, laundromats and pizza chains added “.com” to corporate names and watched valuations triple before the Nasdaq collapsed 78%. Cloud-washing in 2011-2014 saw trucking companies rebrand logistics software as “cloud transport platforms,” peaking with Cisco’s $1 billion acquisition of truck-tracking firm NDS that was later written down to zero.

The current wave arrives as venture funding for genuine AI start-ups contracts 38% year-over-year, according to PitchBook data through April. Retail investors searching the next Nvidia are piling into low-float micro-caps, creating violent momentum trades. Social media forums on Reddit’s r/algotrading have 3 million members sharing daily “AI ticker bingo” lists where the only entry criterion is a keyword in that morning’s press release.

What’s Next

The SEC’s Grewal scheduled a July 9 roundtable with state attorneys general to coordinate enforcement, and subpoena powers are expected to focus on companies that announced AI pivots without corresponding R&D spending increases. Options markets price a 64% chance that at least one NASDAQ firm will restate earnings before October 1 citing “material misstatements regarding artificial-intelligence capabilities,” according to CME volatility data.

Watch for class-action suits to target law firms that vetted the disclosures. Quinn Emanuel partner Derek Lammers predicts “a blood-bath of malpractice claims” if accounting fraud emerges, noting insurers already excluded “AI-forward statement liability” from some directors-and-officers policies written after March. The next headline risk may hit overnight when second-quarter 10-Q filings arrive in August and software engineers are forced to explain their “proprietary models” under oath.