Companies are latching onto the hot new AI trend. The feds are warning they're watching for false claims.

• The FTC warned companies to avoid overselling their AI products in a blog post on Monday.
• It called AI a "hot marketing" term that some companies won't be able to stop themselves from "abusing."

So many companies are claiming to use artificial intelligence that the Federal Trade Commission has stepped in — warning that it's watching for false promises.

Michael Atleson, an attorney for the FTC's division on advertising practices, wrote in a blog post on Monday that AI has become a "hot marketing" term that some companies "won't be able to stop themselves from overusing and abusing."

"Marketers should know that — for FTC enforcement purposes — false or unsubstantiated claims about a product's efficacy are our bread and butter," the regulator said. "You don't need a machine to predict what the FTC might do when those claims are unsupported."

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Since debuting last year, ChatGPT has captured public attention for its ability to do anything from write essays to code. The craze has caused an AI arms race between Big Tech companies like Microsoft and Google. More recently, Snapchat has announced ChatGPT would be incorporated into its app, and Meta said it launched a top level team for building AI tools.

But its not just the tech giants. News organizations like Buzzfeed and CNET have also begun using AI. Even some retailers have incorporated AI into their marketing, and services like Zoom Video Communications, as well as cybersecurity companies like Palo Alto Networks, have also said they've started using the tech.

References to artificial intelligence and related terms during earnings calls jumped 77% this earnings season compared to a year ago, according to a report from Bloomberg.

And there's good reason for dropping the reference: Shares of relatively unknown companies with the term "AI" in the name have skyrocketed over the past few months, the publication said.

"It is impossible to quantify what the impact of AI could be and equally possible that a wave of enthusiasm carries stocks with expertise in or exposure to AI, no matter how tenuous, higher and higher," Russ Mould, an investment director at AJ Bell told Bloomberg.

The FTC said the market has been primed for "AI hype" for decades, alluding to stories like Frankenstein to Pinocchio.

"For generations we've told ourselves stories, using themes of magic and science, about inanimate things that we bring to life or imbue with power beyond human capacity," the blog post said. "Is it any wonder that we can be primed to accept what marketers say about new tools and devices that supposedly reflect the abilities and benefits of artificial intelligence (AI)?"

While the FTC did not specifically mention any companies that have peddled false AI promises, Atleson wrote that the "AI hype is playing out today across many products, from toys to cars to chatbots and a lot of things in between."

For example, the FTC said it would be an exaggeration for a company to claim its AI technology could generally make "trustworthy" predictions of human behavior — which is not yet scientifically possible. The FTC also said it would be misleading for a company to claim a product uses AI if AI is only used in the development of that product.

The comments could set the stage for future battles between regulators and tech companies, as the attorney warned that some companies might be exaggerating the capabilities of their technology, while others might not work properly or might advertise AI capabilities without truly using artificial intelligence at all.