Criticalcascading

Spiraling Hallucination Loops

Small deviations from reality quickly spiral into disaster as agents build further reasoning on increasingly shaky foundations.

Overview

How to Detect

Agent outputs become progressively more disconnected from reality. Confident assertions about clearly false information. Elaborated details on non-existent entities. Cost and token usage spike unexpectedly.

Root Causes

Agents build reasoning on previous outputs without verification. No grounding checks at intermediate steps. Confidence doesn't decrease with distance from verified facts.

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Deep Dive

Overview

Spiraling hallucination loops occur when an agent makes a small initial error, then compounds that error through subsequent reasoning steps. Each iteration drifts further from reality while the agent maintains or increases confidence—creating a feedback loop of fabrication.

Mechanism

Step 1: Agent states "Company X released product Y in March"
        (Actually released in April - small error)

Step 2: Agent elaborates on "March launch marketing campaign"
        (Completely fabricated)

Step 3: Agent analyzes "Q1 sales impact from March launch"
        (Pure hallucination built on hallucination)

Step 4: Agent recommends strategy based on "Q1 performance"
        (Confident recommendation with zero grounding)

Production Incident: 693 Lines of Hallucination

Research documented a coding agent that spiraled into 693 lines of hallucinated code:

  • Started with a minor misunderstanding of the codebase
  • Invented non-existent APIs to fill gaps
  • Created elaborate type systems for fabricated functions
  • Produced syntactically valid but semantically meaningless code
  • Maintained high confidence throughout

Cascade Contamination

Galileo AI research (December 2025) found that in simulated multi-agent systems, a single compromised agent poisoned 87% of downstream decision-making within 4 hours. The spiraling effect accelerates in multi-agent environments.

Financial Impact

Analysis shows:

  • Hallucinated item corrupts pricing logic at step 6
  • Triggers inventory checks at step 9
  • Generates shipping labels at step 12
  • Sends customer confirmations at step 15
  • By detection, four systems are poisoned
  • Incident response cost multiplies 10x

Warning Signs

Progressive Elaboration

Each step adds more specific (but fabricated) details.

Declining Source Attribution

Agent stops citing sources or cites non-existent ones.

Semantic Drift

Terminology slowly diverges from domain norms.

Confidence Paradox

Agent becomes MORE confident as it drifts further from reality.

Research Findings

"The initial hallucination isn't the real problem—it's the cascade it triggers. Hallucinated facts don't stay contained; they become inputs for subsequent decisions."

How to Prevent

Grounding Checkpoints: Verify key assertions against original sources at each reasoning step.

Drift Detection: Monitor semantic distance from initial context and known facts.

Ensemble Verification: Run critical steps through multiple models; require consensus.

Uncertainty Accumulation: Confidence should decrease with each inference step, not increase.

Early Termination: Halt processing when drift exceeds threshold.

Human Review Triggers: Flag outputs that elaborate significantly beyond input facts.

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Test in Playground

Real-World Examples

A legal research agent began with a minor case citation error, then fabricated an entire line of precedent including fake judges, fictional rulings, and invented legal principles—all presented with high confidence to attorneys.

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Tags
hallucinationloopsspiralingcascadingdrift

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