Artificial Intelligence Players Must Weigh High Rewards With Immense Risks: Moody's

Artificial intelligence is a transformative technology with enormous potential to shake up several industries. A new report from Moody’s emphasizes the need for companies to weigh risk with reward in the race to roll out AI.

The Balancing Act: Companies face a difficult balancing act in AI adoption, according to Moody’s. If they roll out AI too quickly, they face exposure in the event of an AI incident.

Companies risk legal challenges, cyberattacks and high IT costs that could quickly outweigh any potential benefits of enlisting the technology, the analysts said. In addition, firms risk reputational damage. For example, Alphabet Inc GOOGL faced a public relations scandal after its Gemini model generated inaccurate historical images.

On the flip side, companies also face risks if they do not adopt AI quickly enough. Falling behind the AI curve could result in an irreparable loss of competitive advantages as AI’s disruptive nature takes effect.

To develop AI responsibly, Moody’s suggests satisfying multiple criteria in AI adoption. Businesses must weigh robust performance, ethics, transparency, legal compliance and security amid other considerations. Juggling these responsibilities is admittedly a tall task, and “trade-offs must be made,” Moody’s said.

Who Stands to Gain: Moody’s pegs large tech companies as the firms most likely to succeed in walking the AI tightrope. While Alphabet, Tesla Inc TSLA, Meta Platforms Inc META and Microsoft Corp MSFT have all experienced AI-related incidents in the past, the companies were able to endure them on the strength of extensive financial resources and operational resiliency.

Who Stands to Lose: Small businesses will face challenges in AI adoption due to small footprints and lack of operational know-how, according to Moody’s.

In addition, non-tech companies face significant risks. For example, Zillow Group Inc Z faced a $304-million writedown after its AI home appraisal algorithm faced heavy exposure to housing prices during the COVID-19 pandemic. Zillow did not enact the proper safeguards to prevent the catastrophic loss, Moody’s said.

Also Read: At Google I/O 2024, Sundar Pichai And Team Announce New Gemini Models, Project Astra, AI Fraud Protection And More: Here’s All You Need To Know

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