Investors Beware, Not all that Learns is Artificial Intelligence

Author: Lindsey Boycott

Estimated read time: 3 minutes

Publication date: 19th Aug 2019 22:00 GMT+1

Artificial intelligence is the buzzy new technology that is catching the eye of investors both in the US and overseas. With $17.5 billion in funding raised going towards AI startups in the first half of this year, venture firms are well on their way to almost tripling their contributed capital from the $12.3 billion in 2017.

“You get three to four times [more] interest from venture capitalists and investors if you claim that you have AI, or your solution is AI-driven,” said Vasile Foca, managing partner at investment firm Talis Capital, in an interview with WSJ.

AI can be loosely defined as any device that can perceive its environment and take actions to maximize its chances of achieving its goals. Given both the open-ended nature and complexity of the technology, it can be difficult for the lay investor to properly vet a company’s claims of employing artificial intelligence within their operations.

Not all AI is created equally, however. Concerns about exaggerated machine-learning capabilities have recently surfaced about Silicon Valley startup Engineer.ai – a company that claims it can “build, run & scale” mobile apps using “human-assisted AI” technology. In 2018, the LA-based company had successfully raised $29.5 million in funding from the likes of multi-billion-dollar conglomerate SoftBank via their investment subsidiary DeepCore.

In an onstage interview from September 2018, Engineer.ai founder Sachin Dev Duggal stated that approximately 82 percent of an app the company had recently built had been put together through an automated AI process within the first hour – with the extra pieces being built by developers over the next five weeks. A different story is starting to emerge as some people familiar with the matter – including past and current employees – have come forward to contest Duggan’s claims about the role artificial intelligence plays in creating their apps.

Some have stated that Engineer.ai relies primarily on human developers from India and other countries to write code for their customers’ apps. The firm’s former chief business officer, Robert Holdheim, filed a wrongful dismissal suit with the Los Angeles Superior Court in February where he alleged that Duggal admitted to inflating the company’s AI tech abilities.

“Every tech startup exaggerates to get funding – it’s the money that allows us to develop the technology,” Duggal stated, according to Holdheim’s court filing. He also added that Duggal was reportedly “telling investors that Engineer.ai was 80 percent done with developing a product that, in truth, he had barely even begun to develop.”

While the details surrounding Engineer.ai and their AI process remain sketchy, there are many ways the tech is being legitimately applied every day. For retail investors keen to invest in the artificial intelligence sector, they need look no further than the tech giants that run modern life. Everyone from Google, to Netflix and LinkedIn use artificial intelligence to do everything from internet searches to providing personalized recommendations based on user preferences.

Other companies like semiconductor manufacturer Intel, social media giant Facebook, and cloud-based Twilio could represent sound investment opportunities for those with tech investment leanings.

Sources:

https://investorplace.com/2019/08/to-find-artificial-intelligence-stocks-to-buy-think-like-bill-gates/

https://thenextweb.com/artificial-intelligence/2019/08/15/this-startups-ai-to-build-your-apps-is-just-a-bunch-of-human-devs/

https://www.wsj.com/articles/ai-startup-boom-raises-questions-of-exaggerated-tech-savvy-11565775004?mod=rsswn

https://money.usnews.com/investing/stock-market-news/slideshows/artificial-intelligence-stocks-the-10-best-ai-companies?slide=9

https://www.crunchbase.com/search/organization.companies/d9e37fc4f7de92f027767341ab95b4d2

https://www.engineer.ai/how-it-works/


Disclaimer: Lindsey Boycott is an experienced financial consultant who writes for Finscreener.com. The observations she makes are her own and are not intended as investment or trading advice.