Microsoft Warns That Artificial Intelligence, Trade Policies May Present Risks To Business

Microsoft is warning investors that artificial intelligence technology as well as any changes to trade policies around the world may present risks to its business.

In a regulatory filing Friday, the Redmond, Wash.-based tech powerhouse said that "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."

It's the first time the company has specifically mentioned AI technology in such detail in its 10-K filing as part of its standard list of potential risk factors.

Microsoft did not respond to a request for comment by press time.

The company also said that "these deficiencies could undermine the decisions, predictions, or analysis AI applications produce, subjecting us to competitive harm, legal liability, and brand or reputational harm. Some AI scenarios present ethical issues. If we enable or offer AI solutions that are controversial because of their impact on human rights, privacy, employment, or other social issues, we may experience brand or reputational harm."

Microsoft has been investing in AI technology in recent years, Bonsai provides a faster way to build the "brains" necessary for robotics and other autonomous systems.

Microsoft also said that any changes to trade policy or deals could adversely affect the company’s sales in foreign countries as tariffs are increased.

’Emerging nationalist trends in specific countries may significantly alter the trade environment,’ the company said in its filing. ’Changes to trade policy or agreements as a result of populism, protectionism, or economic nationalism may result in higher tariffs, local sourcing initiatives, or other developments that make it more difficult to sell our products in foreign countries.’

The company, which does business in 200 countries and reported $90 billion in total revenue in 2017, said that ’disruptions of these kinds in developed or emerging markets could negatively impact demand for our products and services or increase operating costs.’

The company employed approximately 131,000 full-time workers -- 78,000 in the U.S. and 53,000 internationally – as of June 30, 2018, according to the filing.

Last month, Microsoft President Brad Smith reflected on tech's role in a changing world at the company's Inspire 2018 conference.

"We make technology that is global, but the world is increasingly focused on the borders that divide nations, rather than the technology that connects us," he told the crowd. "And even when people think about technology, they have a lot more questions than they did a year ago. Every day we see headlines about the anxiety people have about technology. We see people questioning whether they can trust technology."