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Wednesday, March 1, 2023

The generative A.I. boom is risky

It’s been less than a month since Microsoft (MSFT) unveiled its new ChatGPT-powered Bing search engine and Edge browser, and seemingly every tech company is now officially riding the generative A.I. hype train.

Google (GOOG, GOOGL) has its ChatGPT-style Bard in the works, Snap is adding an A.I. chatbot to its platform, and Meta (META) is creating a new generative A.I. team. Spotify (SPOT) is getting in on the action with a generative A.I.-powered DJ, and even Snapple, yes that Snapple, is rolling out a generative A.I. version of its Snapple Facts.

But the race to be a part of the generative A.I. party has its risks, including rolling out products that aren’t ready for prime time, and could leave consumers with a sour feeling about the latest tech must-have.

“Consumers might expect and anticipate that there's something dramatically new and different here,” explained Robert Seamans, associate professor of management and organizations at New York University’s Stern School of Business.

“And so you could imagine that either an underwhelming-ness effect or a fear effect leads to there being less demand than one of these companies would want for this product.”

The risk of hype is real

The biggest potential problem with companies diving headlong into the generative A.I. space is the further spread of wildly inaccurate or strange content. Take ChatGPT: it’s trained on data from the web, and while there’s plenty of accurate information online, there’s also a boatload of downright fake content.

“I think it's very possible that without the right restrictions, and guidelines, and sort of boundaries in place, these things can evolve to be probably very problematic in many concerning ways,” explained Edward McFowland III, assistant professor in the technology and operations management unit at Harvard Business School.

“What we have to make sure we're doing again, those who are building them and those who are utilizing them in their products, is try to put those guardrails up.”

We’ve already seen what happens when companies try to release chatbots before they are ready for the public. Meta’s Galactica A.I. bot, for instance, was designed to help summarize scientific papers but ended up outputting false information, and the company had to pull it back. And Microsoft famously killed its Twitter-based Tay chatbot after it quickly started posting inflammatory comments it learned by interacting with Twitter users.

The explosion in generative A.I. hype could also result in consumers pushing back on the technology if they’re exposed to negative interactions or simply underwhelmed by what they experience.

A.I. might be the latest trend, but it’s got more to offer

The kind of A.I. powering ChatGPT isn’t exactly new. You can think of it as a kind of super advanced version of the predictive text feature on your smartphone. You know, the one that constantly sends “duck” instead of, well, what you actually mean to type.

But tech stocks are down over the last 12 months thanks to a litany of macroeconomic roadblocks, including falling ad sales and declining consumer demand for hardware like PCs and smartphones. And so, to offset that, companies are diving in to book a ticket on the generative A.I. train.

“The tech sector is down, suffering, and looking for some answer,” explained Rajesh Kandaswamy, distinguished VP analyst at Gartner. “This is one more element for them to try to make money, be in the limelight, and show their innovation.”

It’s telling, Kandaswamy said, that during boom years, tech companies would focus on saying they’re more interested in developing products for the long run but now are elbowing each other out of the way to claim their stake in the generative A.I. space.

It’s not as though these companies haven’t been developing the technology behind the scenes either. Google has been developing A.I. for years, and helped create some of the key features that help "general pre-trained transforms," the GPT in ChatGPT, work.

“They stopped investing in blockchain, they stopped investing in metaverse or whatever, and everybody's seeking A.I. deals,” explained Ari Lightman, Carnegie Mellon University Heinz College professor of digital media and marketing. “AI has been around forever, all of a sudden, it's hot because of ChatGPT.”

A.I. also provides a concrete means of bringing new products to businesses and consumers, unlike more nebulous tech fads like the metaverse or one-offs like NFTs.

Nearly every piece of tech you touch today uses some form of A.I., whether that’s Google Search, your iPhone’s reminder app, or your smart TV. As companies continue to invest in the technology, whether it’s generative or another form of A.I., new use cases and improvements will emerge. As long as the hype train doesn’t jump the tracks.

By Daniel Howley, tech editor at Yahoo Finance. Follow him @DanielHowley

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