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A much-ballyhooed AI consumer device flops. Federal regulators hone in on potential antitrust activity at Microsoft Corp., Nvidia Corp. and OpenAI. California state lawmakers are seeking the toughest restrictions in the U.S. on AI to protect consumers. Publicly-traded tech companies hesitate to disclose their AI-related revenue.

Step back from the generative AI hype, and you begin to see plenty of cracks in the shimmering façade.

The most ominous sign comes from Washington, D.C., where officials at the Department of Justice and Federal Trade Commission are investigating the business practices at AI’s leading gen-AI companies.

“With the Microsoft-OpenAI partnership, it’s not hard to see some potential issues with one of the largest, if not the largest, operating software companies in the world teaming up with the largest AI platform,” Abiel Garcia, an attorney specializing in antitrust law, said in a text message. “While they may not be direct competitors yet, they could be in the future or could be vertical components in a chain.”

AI, he added, is something that regulators are “trying to get ahead of instead of caught off guard” after largely overlooking the deleterious effects of social media, said Garcia, who doesn’t foresee any action this year.

Meanwhile, with prospects bleak for any national AI law, California is exploring rules to protect intellectual property and jobs, as well as bills to prevent AI tools from discriminating in housing and health care services.

Of more immediate concern are consumer AI misfires. In their haste to get products to market, vendors like Humane are discovering that first to market doesn’t equate to success. Two notable glitches – overheating and a weak battery – doomed Humane’s Ai Pin, a $699 wearable device designed to disrupt the smartphone.

Lackluster sales – as of April, Humane had received 10,000 orders when it expected 100,000 this year, according to the New York Times – prompted Humane executives to explore a potential sale of the company to HP Inc.

The gadget gaffe underscores the risks of AI hardware makers who are rushing to market to create products for AI-wary consumers while facing increasing pressure from investors, who have poured billions of dollars into their ventures. [Among Humane’s backers are Salesforce Inc. Chief Executive Marc Benioff and OpenAI CEO Sam Altman.]

Apple’s AI Wave

Even Apple Inc., which plunged into the AI fray this week during its annual developers conference, WWDC, is no slam dunk to ignite the market. The company that has traditionally waited for others to establish consumer technology such as smartphones and tablets is injecting AI into nearly every corner of its business. We should see the initial results during Apple’s annual September hardware showcase.

The headliner at WWDC was “Apple Intelligence,” which promises AI-enhanced capabilities for the Siri voice assistance and apps, as well a partnership with OpenAI to offer ChatGPT access to iOS 18 and future iPhones and iPads.

The announcements “help Apple bring general intelligence to the mass market by delivering a system-wide intelligence that is personal and has context making everything better,” Creative Strategies President Carolina Milanesi, who attended the Apple event, said in an email message. “It delivers much more impact to a user. That is the key difference between what we have seen so far and it’s interesting how they are differentiating Apple Intelligence as personal versus chat.”

At the very least, “Because it’s Apple, it will introduce GenAI to more people than anything else before it,” said Bob O’Donnell, president and chief analyst at TECHnalysis Research. “I think the capabilities are good enough to get more people to appreciate what GenAI can do and that will open up new possibilities for other AI services down the road. The bigger question is how they handle OpenAI if it continues to have issues.”

It should be remembered that at the same conference a year ago, Apple Vision Pro debuted to considerable hype yet hasn’t caught on with consumers because of a prohibitive price tag ($3,500), bulky design and dearth of apps for the spatial-computing device.

For nearly a decade, in fact, Apple has teased its AR/VR plans, which came to fruition symbolically with Apple Vision Pro.

Early Innings Of AI

Indeed, the tech industry – which repeatedly has reminded analysts and press that it is in the “early innings of AI” – has fallen victim to unrealistic expectations. An AI hiring wave and billions in investments have yet to translate into appreciable AI-related revenue, with few companies disclosing real numbers. [One exception, Amazon.com Inc., crowed that the appeal of AWS’s AI capabilities is “reaccelerating” the cloud division’s growth rate, which spiked 17% to $25 billion, year-over-year, during its recently completed first quarter.]

Consider: Less than one in five companies acknowledge their generative-AI efforts have advanced into use cases, and a paltry 6% have put those into production, according to a recent AWS survey of chief data officers.

There are even murmurs among some in Silicon Valley that the AI hype balloon will eventually follow the same boom-to-bust trajectory as the industry’s COVID narrative: An initial surge of sales and hiring for the largest tech companies followed by the inevitable decline and cutbacks.

“There is this thought that tech waves a magic wand and sales instantly happen, whatever the hype cycle,” Sam Liccardo, who is running for a Congressional seat in Silicon Valley, said in a phone interview. “With AI, and the distrust of consumers, I’m not so sure, though.”