What happened
Could the boom in artificial intelligence (AI) stocks be coming to an end? It isn't likely, given the excitement over the technology, but on Tuesday, there was an indication that some investors might be pausing for breath. Bellwether AI stock c3.ai (AI 3.02%) took a 0.6% hit to its share price on a day when the S&P 500 index crawled marginally higher. A development in the regulatory sphere was the main cause of the drop.
So what
The European Union (EU), which tends to be more protective of its consumers than the U.S., has passed a new law regulating AI. The straightforwardly named AI Act places applications of the technology into three risk categories.
The first is what the Act terms "unacceptable risk," which covers government-run social scoring; the EU cited China's long-running program as an example. The second is "high-risk," which includes resume-scanning tools that rank job candidates -- these would be subject to a number of legal requirements. The third category includes everything else, which will generally be left unregulated.
The Act also requires AI app developers -- like C3.ai -- to make publicly available more of the foundational data they harness for their offerings.
The Act was passed overwhelmingly in a vote by the EU's parliament. It has several more procedural steps to go before it is officially made into law in the 27-member economic bloc.
Now what
While AI is enjoying white-hot popularity with both users and investors just now, this is accompanied by a degree of controversy. Many are concerned about the power of the technology and its use by bad actors. While a great portion of the public surely believes a degree of regulation is necessary, investors are understandably concerned about the potential impact on the business of AI developers.
