> Can someone explain to me the rationale of investing in a product, marketing it, seeing that it drives consumers away from your product and erodes trust, and then you continue to invest at an accelerating rate?

I'll take a stab at this. It's not 100% clear to me which product you're referring to, so I'll try to answer as if the product is something that already has customers, and the maker of the product is shoving AI into it. The rationale is that the group you're trying to convince that you're doing a good job is your shareholders or investors, not your actual customers. You can justify some limited customer attrition by noting that your competitors are doing the same thing, and that maybe if you shove the _right_ AI features into the product, you'll win those customers back.

I'm not saying it's a _good_ rationale, but that seems to be what's at play in many cases.

Correct. More succinctly, this what happens when the share price becomes the product.