Microsoft warns investors that its artificial-intelligence tech could go awry and hurt its reputation

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Microsoft is spending heavily on its artificial-intelligence tech. But it wants investors to know that the tech may go awry, harming the company's reputation in the process. Or so it warned investors in its latest quarterly report, as first spotted by Quartz's Dave Gershgorn. "Issues in the use of AI in our offerings may result in reputational harm or liability," Microsoft wrote in the filing. "AI algorithms may be flawed. Datasets may be insufficient or contain biased information. Inappropriate or controversial data practices by Microsoft or others could impair the acceptance of AI solutions. You can read the full filing below. Despite the big talk from tech companies such as Microsoft about the virtues and possibilities of AI, the truth is that the technology is not that smart yet. Today, AI is mostly based on machine learning, in which the computer has a limited ability to infer conclusions from limited data. It must ingest many examples for it to "understand" something, and if that initial data set is biased or flawed, its output will be, too. Intel and startups such as Habana Labs are working on chips that could help computers better perform the complicated task of inference. Inference is the foundation of learning and the ability of humans (and machines) to reason. And Microsoft has already had a few high-profile cases of snafus with its AI tech. In 2016, Microsoft yanked a Twitter chatbot called Tay offline within 24 hours after it began spewing racist and sexist tweets, using words taught to it by trolls. More recently, and more seriously, was research done by Joy Buolamwini at the MIT Media Lab, reported on a year ago by The New York Times. She found three leading facial-recognition systems -- created by Microsoft, IBM, and China's Megvii -- were doing a terrible job identifying nonwhite faces. Microsoft's error rate for darker-skinned women was 21%, which was still better compared with 35% for the other two. Microsoft insists that it listened to that criticism and has improved its facial-recognition technology. Plus, in the wake of outcry over Amazon's Rekognition facial-recognition service, Microsoft has begun calling for regulation of facial-recognition tech. Microsoft CEO Satya Nadella told journalists last month: "Take this notion of facial recognition, right now it's just terrible.