AI or Smoke‑and‑Mirrors? Spotting False AI Claims Before You Sign the LOI
- mdoody0
- Apr 20
- 2 min read
Updated: Aug 5
Why “AI-washing” is the newest valuation trap
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.If you want help mapping it out, I’ve been inside the pilot graveyards - I know what breaks, what scales, and what’s just theatre.
📩 michael@theimpactcto.com🌐 www.theimpactcto.com
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