Collateral Psychosis: AI Surveillance Infrastructure as an Etiological and Iatrogenic Factor in Paranoia-Spectrum Conditions

The emerging literature on AI-induced psychosis documents harm arising exclusively from direct interaction between users and large language model systems: a user prompts the AI, the AI responds, and the conversational loop escalates into delusional states, emotional dependency, or reality dismantlement. This paper argues that the field's exclusive focus on interaction-based harm has obscured a categorically distinct phenomenon: AI-induced psychosis in the complete absence of user interaction. AI systems deployed as surveillance infrastructure (automated license plate readers, geofence analytics, facial recognition, behavioral inference engines) can generate and sustain paranoia-spectrum conditions in individuals who never open a chat window, never prompt a model, and never receive a generated response. The mechanism operates through environmental exposure rather than conversational engagement, following the etiological model of trauma-induced and environmentally-induced psychosis rather than the substance-induced model that governs interaction-based cases. Drawing on established psychiatric epidemiology of environmental risk factors for psychosis, independently documented cases of AI systems inducing psychotic states in previously healthy individuals, and the clinical analysis of surveillance-induced therapeutic destruction presented in the companion paper (Gilly, 2026a), this paper introduces the category of collateral psychosis, defined as clinically significant paranoia-spectrum symptomatology arising from ambient exposure to AI-powered infrastructure rather than from direct engagement with AI systems. The paper identifies two population-level effects: an iatrogenic effect, in which surveillance infrastructure degrades the treatability of existing paranoia-spectrum conditions by eliminating the falsifiability of persecutory beliefs; and an etiological effect, in which sustained exposure to confirmed, inescapable surveillance produces new-onset paranoia-spectrum symptomatology in individuals with no prior psychiatric history. The distinction between these effects has implications for clinical intervention, legal liability, and the scope of the AI safety research program.