Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.
This article is featured in the Q1 2026 Future Strategist newsletter, you can read the rest of the newsletter here.
AI continues to dominate corporate messaging and investor discussion. From earnings calls to capital markets days, management teams are keen to demonstrate that AI is embedded in their strategy and capable of driving productivity, growth or margin expansion.
Much of this enthusiasm is justified. However, recent months have also seen a rise in accusations of “AI washing”, where the role and impact of AI are overstated, selectively framed or insufficiently evidenced. For investors, this is not an abstract debate but has increasing relevance to valuations, earnings quality and, importantly, governance assessment.
A common feature of recent AI washing concerns has been the way AI is framed in workforce and restructuring announcements. Several large, listed technology and consumer facing companies have pointed to AI-driven efficiency when announcing job cuts or organisational redesigns. In some cases, this may reflect genuine automation or workflow optimisation. In others, however, the linkage between AI deployment and headcount reduction is left vague. Analysts have noted that explanations often lack detail on which processes have
been automated, how productivity has changed, or whether AI is replacing labour at scale rather than augmenting it.
This matters because the distinction is economically significant. True AI-driven productivity gains imply durable cost advantages and improved returns on capital. Cost cutting framed as “AI-enabled” but driven primarily by cyclical demand, post-pandemic normalisation or tighter financial conditions carries very different long-term implications. When narrative runs ahead of evidence, the risk of mispricing increases.
AI washing is not limited to workforce discussions. Product descriptions and revenue narratives have also changed to incorporate AI themes. It is now common to see existing analytics tools, rule-based automation or third-party software integrations described as “AI-powered” without clarity on how differentiated or defensible those capabilities are. In some cases, companies emphasise AI-related opportunities while providing limited disclosure on required investment, data constraints or implementation risk. This can leave investors with an incomplete view of the trade-off between near-term promise and execution complexity.
Regulators are paying closer attention. Both US and European authorities have made clear that AI-related claims are subject to the same standards as any other corporate disclosure. The issue is not whether a firm aspires to use AI, but whether public statements accurately reflect how technology is deployed today and what it can realistically deliver. Recent enforcement actions and public warnings suggest regulators are increasingly sceptical of broad or unsubstantiated AI claims, particularly where they may influence investor decision-making.
For us as investors, AI washing introduces several overlapping risks, some of which bring echoes of the original internet bubble. The most immediate is valuation risk. AI narratives have supported higher multiples, especially where companies promise efficiency gains or structural growth. If those benefits fail to materialise, or if execution proves slower or more capital-intensive than expected, rating compression can be swift.
There is also earnings quality risk. When margin improvement or cost savings are attributed to AI without clear metrics, it becomes harder to judge sustainability. Governance and disclosure risk is rising too. Overly promotional language can be a signal of weak internal discipline around reporting and investor communication. Finally, regulatory and litigation risk – while still emerging – should not be ignored, particularly as AI references proliferate across annual reports, earnings calls and investor presentations.
None of this undermines the long-term importance of AI. Many businesses are making meaningful, measurable progress by harnessing AI. The challenge for investors is separating those delivering tangible outcomes from those relying primarily on storytelling. In practice, this means focusing less on the presence of AI in the narrative and more on the evidence behind it.
As in previous technology cycles, our long experience should help us to differentiate between delivery and aspiration. At the core, disciplined analysis and a healthy scepticism towards fashionable language will remain our essential tools.
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KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
The Funds managed by the Global Equities Team:
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Certain countries have a higher risk of the imposition of financial and economic sanctions on them which may have a significant economic impact on any company operating, or based, in these countries and their ability to trade as normal. Any such sanctions may cause the value of the investments in the fund to fall significantly and may result in liquidity issues which could prevent the fund from meeting redemptions.
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May, in certain circumstances, invest in derivatives but it is not intended that their use will materially affect volatility. Derivatives are used to protect against currencies, credit and interest rate moves or for investment purposes. The use of derivatives may create leverage or gearing resulting in potentially greater volatility or fluctuations in the net asset value of the Fund. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead.
The risks detailed above are reflective of the full range of Funds managed by the Global Equities Team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
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DISCLAIMER
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.
It should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets.
This information and analysis is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
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