More corporations are disclosing the risk AI might pose to their businesses

If you’re feeling kinda scared about the rapid developments we’ve seen in artificial intelligence lately, well, you should know you’re not alone. Turns out corporate America is increasingly worried too. 

By law, public companies have to tell investors what material risks could hurt their profitability — that’s usually stuff like the possibility of a weakening economy or supply chain issues. And according to a new analysis by the company Arize AI, over 56% of Fortune 500 companies have now listed AI as one of those risk factors in their annual reports to the SEC.

Now what exactly those risks are — and which companies are worried — well, they may not be what you’d expect.

Netflix, for example, is the undisputed king of streaming. But it does face risks: How inflation will impact consumers, lingering labor issues, running out of unsolved crimes to make documentaries about. And if you flip to item 1A, page five of Netflix’s annual SEC filing, you’ll see a new source of worry: generative AI.

“It can lower costs of creating content that makes it easier for other players to enter the space and potentially increase the competitiveness of user-generated content on platforms like Tiktok or YouTube,” said Jamie Lumley, an analyst with the investment research firm Third Bridge.

According to that Arize report, 92% of media and entertainment companies in the Fortune 500 mentioned AI as a material risk — the highest percentage for any industry.

But it’s not just media that’s worried. Constellation Brands, which makes Corona beer and Kim Crawford wines, has also listed AI as a risk factor in their SEC filing.

For plenty of companies, AI is less of a direct competitive threat, and more a security problem, like employees giving sensitive information to ChatGPT, said Joe Lazzarotti, an attorney with the law firm Jackson Lewis. 

“There could be a customer list that could be compromised. There could be confidential information about a business opportunity that winds up getting disclosed,” he said.

The AI risks companies are worried about aren’t always external. For tech companies especially, the risk is coming from inside the house: Legal, regulatory and reputational threats come with deploying their own AI. 

But Arize AI CEO Jason Lopatecki said there’s a bigger risk behind the SEC disclosures.

“AI is going to eat a lot of industries,” he said. “And ‘you don’t invest here, you are at risk,’ and I think that’s the tension you’re feeling.”

For many companies, not investing in AI could be the riskiest path to take.