Definition
AI Market Hype can be understood as the creation or perpetuation of a hype cycle that shapes market perception1 regarding AI products or services influencing commercial behaviour, irrespective of whether those perceptions accurately reflect the technological capability at that time. It represents the disconnect between optimistic narratives and the reality surrounding AI use, which fosters expectations2 beyond the technology's actual maturity.
Commentary
Origin of the term
The concept of AI market hype originates from the broader phenomenon of technology hype cycles created when the emerging technologies promise things substantially exceeding the immediate capabilities. For instance, the recent surge in generative AI, particularly following the public release of ChatGPT3 renewed this phenomenon by triggering unprecedented investment, media attention and commercial enthusiasm, thereby placing AI market hype at the centre of contemporary technological discourse.
Operation in Practice
AI Market Hype typically begins with genuine technological advances that end up receiving disproportionate public attention, leading market narratives to portray AI as capable of transforming organisations or industries more quickly or efficiently than is practically feasible. Venture capital incentives, competitive pressure and fear of missing lucrative market opportunities encourage startups and companies to emphasize future potential over present capability, often attracting investment on the basis of projected rather than demonstrated performance. The resulting 'gold rush' 4 incentivises business to label products as AI-enabled even where they primarily rely on conventional automation, thereby reinforcing AI washing5.
This concept finds itself applied often in sectors such as venture capital, digital markets, technology start-ups, cloud computing among others.
Relevance vis-a-vis Competition Law
AI Market Hype is relevant to competition law since artificial inflation of perceptions has the potential to influence consumer behaviour and competitive dynamics in the market, independent of actual credibility and output. It can also distort capital and resource allocation in terms of investments in firms with compelling but not-so-true AI narratives affecting market entry and firm valuation. It can thus distort market perception and create unfair competitive advantages - through misinformation and influenced purchase decisions - disincentivising genuine innovation.
Related nomenclature for this concept includes AI Hype Cycle, AI Boom, AI Washing, Speculative AI Investment
Abhivardhan, Bhavana J Sekhar, Puolomi Chatterjee Deciphering Artificial Intelligence Hype and its Legal-Economic Risks (Indic Pacific Legal Research LLP 2022)↩︎
Kevin LaGrandeur, ‘The Consequences of AI Hype’(2023) 4 AI and Ethics 653↩︎
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Xiapeng Song and others, ‘AI washing: Strategic discourse and backlash’ (2026) 95 Finance Research Letters↩︎
