Corporate America is sounding the alarm on AI.
An increasing share of companies’ annual filings with the Securities and Exchange Commission now caution investors that the technology could have a significant negative impact on their businesses.
So far this year, 418 publicly traded companies valued at more than $1 billion have cited AI-related risk factors associated with reputational harm in those reports, according to an analysis conducted with AlphaSense. That is a 46% jump from 2024 and roughly nine times greater than in 2023.
AI datasets could hurt a company’s image, the filings say, by producing biased or incorrect information, compromising security, or infringing on others’ rights.
For instance, Take-Two Interactive Software highlighted AI as a risk factor in its 2024 filing with the SEC and expanded that disclosure with more than double the number of words in its 2025 filing.
“All of us are using AI today in a way that’s greater than we used it a year ago and greater than the year before that,” the video-game maker’s CEO, Strauss Zelnick, told Business Insider. “With more usage, more experimentation, and more implementation, there’s the potential for more risk as well.”
Companies taking these steps span a wide range of industries.
For example, Visa’s SEC filing earlier this month says that as the financial services company scales its use of agentic AI for commerce, “we may see increased instances of erroneous or disputed payments, increased chargebacks and reputational harm.”
Consumer-products manufacturer Clorox noted in its August report that AI tools “may compromise confidential or sensitive information,” while cosmetics brand ELF Beauty said in a May filing that its “ability to adapt to new regulations, technological shifts, ethical standards, and stakeholder expectations regarding AI may materially impact our operations, financial condition, or reputation.”
‘Known unknowns’
Companies are legally required to update risk factors in their SEC filings when new, material risks emerge or existing ones change. The goal is to “scare investors” into understanding what could materially harm the company, which is an intentional feature of the system, said M. Todd Henderson, a law professor at the University of Chicago Law School.
“You’ve got to disclose known unknowns,” he told Business Insider.
By adding warnings about AI to their filings, company leaders are showing that they consider the technology’s potential impact as a serious matter, said Henderson, possibly even more so than the rise of the internet in the late 1990s.
Back then, “the disclosures were cautious optimism,” he said, adding that the internet also seemed to pose a threat only to retailers and print publishers, and not to most other businesses.
With AI, the warnings are much starker, and companies across a wide range of industries caution that it could result in grave outcomes, said Henderson.
“Losing your data in a hack is one thing,” he said. “But if you deploy AI and it hallucinates, that’s potentially a much bigger problem. Bad medical diagnoses, legal advice, or engineering conclusions could cause mistakes that threaten the core of the business.”
Employee misuse of AI could also lead to trouble. Some 66% of workers have relied on AI output without critically evaluating the information it provides, and 72% have put less effort into their work due to AI, according to a global survey of 32,352 workers between November 2024 and January 2025 that was conducted by accounting firm KPMG and the University of Melbourne.
Value trumps risk
Despite the risks associated with AI, companies still see significant value in the technology’s potential to boost productivity. Many are racing to invest in the technology. The average total AI spend roughly doubled in 2024 from the previous year to $10.3 million, according to Bain & Co. The management consulting firm looked at companies with annual revenues ranging from $50 million to over $5 billion.
At Take-Two, Zelnick said AI is helping the video-game maker’s workers be more efficient.
“What we’re doing is reducing the weight of mundane work and allowing people to spend their time and brainpower on more interesting work,” he said. “For example, we’ve had levels within mobile games that were created largely by AI. That’s new, and that wasn’t the case a couple of years ago.”
While the “Grand Theft Auto” boss still recognizes AI’s potential downsides, he said that not using the technology would be dicey, too — a conundrum reflected in many companies’ SEC filings, including Take-Two’s.
“A failure to adopt new technology could put you at risk,” said Zelnick.
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