A phenomenon in which an AI model generates plausible-sounding but factually incorrect or nonsensical information.
Hallucinations occur when an LLM favors fluent, statistically likely text over factual accuracy. Enterprise decisions cannot rest on that kind of output, so mitigation combines grounding through RAG, Model Evaluation pipelines, and confidence thresholds that hold back low-confidence answers.
See also Private AI, Digital Transformation and Enterprise Architecture.