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The absence of a stable, inspectable representation of intent. Semantic failure occurs when the relationship between purpose and action is mediated entirely by proxies—the system cannot distinguish between what it is optimising and why it is doing so.
Hallucination isn't a failure of knowledge but of semantic grounding—the model produces plausible text without reference to truth because 'truth' was never a governed object it could check against, only a proxy (human preference for accurate-sounding responses).
SGAI Section 4