Tech Explained: With AI Washing, C-Suite Lets Tech Take the Credit (and the Blame) in Simple Terms

For decades, Wall Street has been plagued by accusations of corporate greenwashing, using aggressive marketing tactics that leave the impression businesses are doing more for the environment than they actually are. Although the term was coined in the 1980s, the adoption of the Paris Agreement in 2015 led to an explosion of corporate pledges to reduce greenhouse gas emissions. Government regulators began cracking down, however, as promotion and perception increasingly diverged from reality.

“Washing” proved so effective in that context, however, that observers say it’s now being used to paint a similarly rosy, as well as illusory, picture of successful AI strategies. Sometimes, the goal is making companies appear ahead of the curve, or at least not behind it. On other occasions, it can mask cost-cutting measures such as layoffs.

“CEOs love AI washing because it makes them sound innovative,” says J.P. Gownder, vice president and principal analyst at Forrester. “It sounds plausible. But it’s often just a financialized decision that they use AI as a scapegoat for.” 

Lipstick for Layoffs 

Companies have been quick to point to automation as the cause of layoffs. Earlier this year, Block cofounder and CEO Jack Dorsey wrote in a letter to shareholders that the company was cutting nearly half its workforce. “We are choosing to shift how we operate at a time when our business is accelerating and we see an opportunity to move faster with smaller, highly talented teams using AI to automate more work,” added Amrita Ahuja, chief financial officer. 

Amazon laid off 16,000 employees in January, just three months after ousting 14,000 workers in October and less than a year after CEO Andy Jassy predicted as much. “We expect that this will reduce our total corporate workforce as we get efficiency gains from using AI extensively across the company,”  he wrote in a memo to employees last summer. Salesforce CEO Marc Benioff said in September that he laid off 4,000 workers because he needs “less heads,” thanks to AI, and education tech firm Chegg shrank its workforce by 45% in October as the “new realities of AI” led to significant declines in traffic and revenue. The list goes on. 

Is AI’s rapid transformation of the market affecting these tech companies? Absolutely. But in some cases, executives are using AI washing to pin the blame for job loss on robots when, in reality, the reasons are more complex, if not altogether different. 

“AI washing sounds better than regular layoffs,” Gownder says. “It implies that your company is so innovative, so ahead of the curve that human employees just aren’t needed anymore. But AI washing also implies that AI isn’t actually taking those jobs and that AI is a convenient scapegoat.” 

Scapegoat, indeed. More than half (59%) of the 1,000 US hiring managers surveyed by Resume.org in December admitted that they emphasize AI when explaining hiring freezes or layoffs because “it plays better with stakeholders than citing financial constraints.” Forrester estimates that fewer than 100,000 jobs were lost to AI and automation in 2025 (“The headlines make it sound otherwise, but not many jobs were lost to AI,” Gownder explains). 

Some occupations, of course, such as the development of software code, are somewhat less conducive to AI washing, Gownder says. Software development is changing rapidly, and AI solutions can generate high-quality code quickly, reshaping employees’ workflows in software-centric companies. But even OpenAI CEO Sam Altman says some companies are blaming AI for job cuts they would have made anyway. 

Upcoming Earnings Season 

Washing aside, AI innovation is not only widespread but also gaining momentum. Target introduced an AI-powered gift finder ahead of the holiday season and Home Depot recently announced new agentic AI tools to provide real-time expert assistance to homeowners. Bank of America said its AI-driven solutions have driven its clients’ digital engagement to record levels, and Papa John’s is teaming up with Google for a voice- and text-based AI ordering system. 

Some companies, however, may be overstating the use of AI-powered systems to attract investors and boost revenues. Come first-quarter earnings next month, AI washing is likely to accelerate, predicts Michael Ni, vice president and principal analyst at Constellation Research. 

“CEOs have to message to investors that they are not falling behind,” Ni says. “If I, as a CEO of a company, fall behind the learning curve of one of my peers, I may never catch up. So I have to show that I’m coming up the curve of how to leverage this disruption of how we do business.” 

That means a heightened focus on efficiency metrics in the short term. In the long term, Ni predicts we’ll start to see more conversation around AI growth initiatives, or what companies that have already jumped the learning curve are doing with the extra margin they’ve accumulated from their short-term strategies. 

The majority (65%) of fourth-quarter earnings calls cited “AI,” according to an analysis by FactSet. The term popped up on 331 calls, which is the highest over the past 10 years and significantly higher than the five-year average of 149 and the 10-year average of 94. 

Fear of Falling Behind 

It’s no wonder that companies want to make sure the market perceives them as being up-to-date on the latest AI innovations. Firms that sell tech to other companies have seen what can happen if the broader market doesn’t think they’re able to keep up. In February, stocks of legal services providers like Thomson Reuters and LexisNexis parent company RELX plummeted after the AI company that created chatbot Claude introduced a legal plugin for its Claude Cowork platform. Financial services stocks like LPL Financial and Charles Schwab also took a hit after Altruist announced a new tax-planning offering within its AI platform.  

Software companies have been taking the brunt of it. Just look at the recent SaaSpocalypse, during which the market turned on companies offering software applications threatened by AI disruption, Ni says. 

“If I sell software, I’d better have an AI story,” he adds. “SaaSpocalypse is just a reflection that you didn’t have a strong AI story both to your customers as well as to the market.”