AI or Smoke-and-Mirrors? Spotting False AI Claims Before You Sign the LOI
The AI gold rush is well underway. So is the noise.
Gartner tracked over 1,000 vendors marketing "AI-powered" products in the past 18 months... many of them little more than rules-based workflows dressed up with buzzwords. Meanwhile, a 2025 McKinsey survey reports that only 1% of global companies consider their AI capabilities mature.
That gap between marketing and reality is your risk. As a buyer or investor, you're often being asked to pay an innovation premium for tech that isn't real, scalable, or defensible.
The AI Reality Check: What Due Diligence Must Include
If you're looking at a company pitching AI as part of its value story especially pre-LOI, there are five areas where you need hard evidence, not hopeful claims:
- Real ML assets: Can they show working models, active feature stores, or infrastructure that supports model development (e.g. GPU usage logs)?
- Data pipeline quality: Is there a data backbone that supports inference and retraining, or is everything stitched together manually?
- MLOps maturity: Look for monitoring, rollback plans, version control, and some kind of ethical risk handling. If it's just Jupyter notebooks, that's a red flag.
- Team capability: Do they have actual ML engineers, or just one "AI product lead" with no delivery history?
- Proof of business impact: Have they monetised the AI in a real product, or is it still in demo-land?
Most AI projects die after pilot stage. You need to be sure what you're seeing is built to last, and tied to revenue.
Translating Tech Hype Into Board-Level Risk
Boards don't want another glossary. They want clarity. That means translating AI claims into three questions:
- Is it real?
- Is it working?
- Does it scale profitably?
If the answer isn't yes to all three, the AI shouldn't justify a premium valuation.
Key Takeaway
AI-washing is real, and expensive. You don't want to find out after the close that the "platform" is just a thin wrapper around ChatGPT and some Zapier flows.
Before you sign the LOI, get clear on what's real and what's not.