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AI's Affordability Crisis

321 points by ilreb

by steveBK123

8 subcomments

I think the biggest problem is not necessarily the cost to develop & serve the models, but how quickly user behavior changed with token based pricing.
I know a lot of people at companies where the marching orders changed on a dime end of Q1/start of Q2. These are shops that were fully on the "use AI or die (because we will fire you)" train.
Now there's monitoring, reporting, alerting not just on overall cost but on "over-use" of best/priciest models based on total-or-percent tokens/dollars, etc. All of this comes with direct developer engagement & standardized management escalation for holding it wrong.
To me this customer behavior does not smell like a product you can 10x the pricing on to get profitable. We have exited the exploration phase and now ROI matters.

by woeirua

5 subcomments

It's not an affordability crisis, it's a financial crisis. The models get cheaper super fast. By this time next year Fable 5 will cost less than Sonnet does today. That's not the problem. The problem is that many companies are going to realize that they don't get any ROI from AI. Generating code faster != more profit. Most of the Fortune 500 will likely realize this and then the token budgets will come crashing down. Most of their ideas are _bad_ ideas. Implementing bad ideas faster, won't lead to more profit.
Sure, you can use AI to potentially replace software engineers, but the F500 are also terrified of not having accountability or making mistakes. They won't be firing any engineers. In that scenario, there's just no room for AI usage. If you have to be responsible for all the code, then... AI has to either manage it completely autonomously (which even Fable can't) or... humans have to be in the loop which means they still have to understand the code. The best way to understand the code is to write the code yourself. So there's no productivity gain to be had.
I'm pro-AI, but I think we're due for a big crash next year.

by 827a

4 subcomments

> Zitron's numbers don't tell us the real cost of generating tokens but, subject to the assumption that the platforms are not subsidizing the token price, that means Anthropic is subsidizing their enterprise customers by up to 40 times, and OpenAI up to 70 times
Neither Anthropic nor OpenAI are subsidizing enterprise customers. Neither Anthropic nor OpenAI allow Business nor Enterprise customers access to the high value $200/mo plan. Both organizations have moved to a "cheaper plan per user + API Pricing after that" (e.g. $20/mo + usage). The $100/$200/mo plans are for individuals only (of course, many individuals use these plans at work, but that's beside the point; they aren't selling this plan to enterprises).
> SemiAnalysis also analyzed the platform's gross margins, implausibly assuming that tokens were priced at 4 times the cost of generating them and: With the current subsidies, all it takes for a user to have a gross margin of at best negative 25% is for them to use as little as 25% of their rate limit.
The article's source for this claim is not SemiAnalysis; its Zitron. But once you dig through his article, Zitron links to a SemiAnalysis tweet [1] where they, as the paragraph states, implausibly assume gross margins of 75% to come up with their weird analysis of the subscription plans. Citing this for anything is weird, because afaik that 75% number is a total shot in the dark. We have no clue what their margins are. My take is that the only reason that 75% number is implausible is because it may underestimate the inference margins of Ant/OAI's API pricing.
[1] https://x.com/SemiAnalysis_/status/2064815045767213400?ref=w...

by tacone

3 subcomments

My take is that Anthropic and OpenAI simply are NOT competing on price. 2 big players are often not enough to create tension on price.
Chinese models and open model providers are, indeed, competing on price, and the difference shows.

by fny

6 subcomments

The unit economics might be just fine. We'll know more after IPO.
The drug dealer analogy has a darker side to it, however.
Once your dependent, they can drive up the price just because. It doesn't need to be for existential reasons.

by chermi

4 subcomments

Lol I feel like no one has any attention span here. Tech shit is expensive in the beginning when it's new. It gets cheaper with time. This is a tech forum, don't we know this? Of course people overreact in both directions on both sides of the issue. It's a very fast technology, wait for things to settle before making grand declarations.

by knuckleheads

2 subcomments

Shouldn't we know a better answer to these questions once Anthropic's IPO materials surface publicly? I understand, and maybe even expect, SpaceX's materials to be all over the place and skate on by any discussion of unit economics, but the nerds over at Anthropic might just be forthright enough to just tell us what their margin is on tokens as part of their IPO.

by qnleigh

1 subcomments

The estimate that AI companies need to replace 27% of jobs to service their debt is interesting. But at least Anthropic and Meta seem to have their eyes on replacing software engineers.
There are ~1.6M software engineers on the US [0], earning a bit under 150k/year on average [1]. If AI companies captured all of that spend, that amounts to about 250B/year. The article assumed that they need around 300B/year to keep up with their debt.
At least based on Meta's recent behavior, forcing 30-50% of developers to switch to data labeling, it looks like that is actually their game plan.
[0] https://en.wikipedia.org/wiki/Software_engineering_demograph...
[1] https://www.indeed.com/career/software-engineer/salaries

by androiddrew

1 subcomments

The over investment by VC means that yeah, they are offering all of this below market rate. It's like Enron where they have to keep the scheme going, and dumping on retail investors is the only thing they can do now.
So we are going to go through a big IPO period. Everything will fall apart because VCs already extracted the growth value, and that will show up after the bag has been passed. Things will implode. What survives afterwards is what we will have.

by gizzlon

4 subcomments

> Sales and Marketing: $5.73 billion .. That is, OpenAI spent 44% of their revenue on sales and marketing!
Anyone know what they are spending this on? Can't remember seeing one OpenAI ad.. Is it just pr and influencers? Ads in the US?

by jschveibinz

5 subcomments

I don't have a crystal ball, but based on similar historical scenarios, I think that one or two of these companies will win--probably because of some unique application, delivery or trade secret that will drive 80% of their revenue.
Consider Google, Apple, Amazon, etc.
It's still early days...

by a34729t

1 subcomments

Deepseek is 90% cheaper, and nearly as good for coding tasks as claude/codex, and as good given the right plan.
The only moat OpenAI and Anthropic have is regulation. If the Chinese really eant to hammer us, they could realse the full training data and pipeline.

by segmondy

1 subcomments

The really crisis is that we are now in a phase of ("AGI" or Bust). That's it. Unless we get a self improving autonomous AI heading towards "singularity" then it's all going to blow up. The amount of money invested is ridiculous and would need a long time to recoup. Without AGI, plenty investors are going to start exiting their positions and the entire thing will be drained.

by titzer

3 subcomments

The coming AI enshittification is going to be epic. For those of us who have been on the web for more than five minutes, we can see this a mile away.
If you think search ads are annoying, pre-roll YouTube ads are annoying, streaming ads are annoying, or basically ads-on-any-screen-anywhere-at-any-time are annoying, just wait until every stupid thing is powered by AI and is subtly trying to manipulate you to buy/watch/believe some crap all the time.

by jwrallie

0 subcomment

Not a heavy user but I got a feeling for this early since I have a Copilot subscription I get for free as an educator.
I used in a day or two the limit that would last me a month. Downgrading from Sonnet to Gemini Flash was the only way to keep the limit longer, and who knows when cheaper models will be discontinued for something more expensive.
I don’t know if the prices will remain low, but at least Chinese models being open make them have no control over when it is discontinued, I think learning to work with open models is a good direction, even if not running it on your own hardware.

by wqaatwt

1 subcomments

This article seems to be struggling with telling apart the difference between R&D and operating expenses? The fact that AI companies are extremely unprofitable doesn’t mean they are subsidizing token costs, they still can have very decent gross margins on them

by khurs

0 subcomment

OpenAI is attending the Cannes Ad Festival (the ad industries premium annual event) for the first time this year, alongside the usual ones like Meta and Google.
Appears that Chat will remain cheap as it can be supported by Ads revenue, coding tools will go up in price post IPO as less able to squeeze ads in?
>“We are clearly in the advertising business now,”
https://www.adexchanger.com/ai/at-its-first-ever-cannes-open...

by orcasushi

0 subcomment

I would say making the model larger and larger will soon reach the "the point of diminishing returns". Even if the model might still get 'smarter' this might not be a good thing because the consumer (us) might not understand at all what the ai is doing. Or it's intelligence will just not be of practical value.
After this it will be hardware optimizations and tooling specializations (having different models for different tasks) and running the whole model might not be too expensive anymore. Will they be outcompeted by cheaper Chinese competitors or open models? Possibly.
I hope we reach the point I can run the whole darn thing on a old laptop.

by avereveard

0 subcomment

> Anthropic is subsidizing their enterprise customers by up to 40 times, and OpenAI up to 70 times
might as well be the other way around with non subscribed token being 50x overpriced, or any combination thereof
also uber was non profitable for the longest time, raking up 31b in losses, on the bet of capturing the market worldwide. scale here is different, but it's also 10 years later, with a lot more volatility and floating cash in the market (voo grew 327% over that period, not unreasonable that round size grew on the same trajectory)

by jdw64

0 subcomment

I can't go back to a life without AI, and I don't want to. But if AI were billed by token instead of subscription, my monthly cost would probably be ten times what it is now. I could switch to a Chinese model, but I'm not sure how things will look by then.
What makes AI so convenient is how good it is at doing red-team code reviews on my work. I used to need all this unnecessary communication just to get a review, but now I only have to reach out to the people I actually want to talk to.

by recursivedoubts

2 subcomments

Once locals get to Opus levels I think it we may see a phase change because that + a reasonably competent programmer is going to be a very powerful combination for most practical programming problems.
Frontier models may eventually achieve super-intelligence (no opinion beyond mild skepticism) but super-intelligence isn't necessary for most practical day-to-day programming. The problems, as always, become communication, understanding what users really need, etc. that is, softer skills.

by mattas

0 subcomment

I can't wrap my head around how revenue > COGS but at the same time AI is being subsidized and the real cost is not affordable.
You don't price based on cost, you price based on willingness-to-pay.
So maybe labs are "overcharging" enterprises on interference (because, up til now, enterprises have seemingly had unlimited budget for tokens) and "undercharging" individuals and SMBs (because they don't have an unlimited budget).

0 subcomment

by raincole

1 subcomments

> OpenAI Had $13.07 Billion In Revenue, $34 Billion In Costs and Expenses, and $20.92 Billion In Losses, with a net loss attributable to the company of $38.53 Billion
This is going to be the new most misquoted/misunderstood data of the year, isn't it? The cost is mostly from a one-time accounting situation due to their pivot from a non-profit organization.[0] If we trust the leak [1] OpenAI is likely turning profitable this year.
[0]: $30Bn of it is the one-time cost. https://www.ft.com/content/e15b0d7e-ff6b-4f16-ba7a-4068feddb...
[1]: I suspect OpenAI itself leaked that financial report. It's almost unbelievably healthy.

by wwind123

0 subcomment

We used to say genius is 1% inspiration + 99% perspiration. Now we say genius is 1% inspiration + 99% tokens.
I was able to enjoy the subsidy from these AI companies to build some projects quickly. Even my wife (non-techie) is able to get a lot of data analysis and processing done once I taught her how to use Codex. We'll just keep enjoying it while it lasts.

by yalogin

0 subcomment

The issue is the cost is not going to be a hindrance for companies that have gone all in on the AI development. They may still find it cheaper than hiring engineers and if needed they will layoff a few more.
The companies that did not yet jump on this bandwagon and are still evaluating will have a decision to make.
No matter what the AI companies are going to change their pricing strategy and it’s going to become a lot lot more expensive to use. I am just hoping the price stays like this until I am done with my big chunk of work

by travisb

2 subcomments

I think a lot of the cost comparisons to employees are off by a factor of 2 or more. AI is the ultimate contractor. Available instantly. Doesn't charge during idle periods. Pre-vetted and pre-trained. No contract negotiations or complex accounting.
That is worth a small multiple of the fully-loaded employee cost. So AI might be easily worth more than $200 per human-equivalent hour. With high utilization, that might be $8000-10000 a month.
With that kind of spend, AI provider financials looks less frightening.

by GodelNumbering

0 subcomment

I don't see any real point being made in (or point of) the article. The author sort of just...dumped a bunch of links with the noise that is so incredibly mainstream at the moment that I doubt any of it is news to anyone even somewhat tracking the AI cycle. Most of it (except for maybe the BLS[1] stat) is just regurgitation.
[1]: And this too is incorrect, should be " the number of jobs displaced would be around 32.5M" (the post says 32.5K)

by atleastoptimal

0 subcomment

These companies biggest source of revenue is per-token pricing though, not subscriptions. On tokens they make a good margin.

by KolibriFly

0 subcomment

I feel like the author is jumping way too fast from "OpenAI is losing money" to "the whole AI economy is broken." A company being in the red during aggressive scaling doesn't automatically mean the unit economics don't work.

by Quarrelsome

0 subcomment

Is it not also possible that some of the shift is a consequence of increase of use? While we can be extremely cynical at the finances at play, the lock down and increase of token pricing might be demonstrating a burgeoning demand, which would be a positive indicator.

by cmiles8

3 subcomments

The math doesn’t add up and the wheels are starting to come off the bus.
The conversation in a lot of wealth management offices has shifted dramatically in the last few month from “how do I get in on this AI thing?” to “how do I protect my assets when this AI stuff blows up.”
There’s little question now if this will all implode, just when and who’s going to lose their shirt and be left without chairs when the music stops.
What’s playing out now is the scene from The Big Short where the banks wouldn’t mark down the value of bonds until they secured a short position. Once the big money has their helmets on it will stop providing fuel for the bubble and then look out below!

by gexla

0 subcomment

Whenever I see the cost indicator in my harness while building some probably useless thing, I'm reminded that probably everyone else is doing the same thing. Spending loads of imaginary money (according to the harness, I spent $10 worth of tokens for this single issue, but I have a $20 sub) building something of imaginary value. And then I go on social media and see a wall of slop posts, many talking about skills, systems, agents, and "Karpathy Wiki Systems" to build more useless things. Then I hear about all jobs going to AI, and I figure surely someone has to be the sane one to direct people not to build useless things. Surely you can't leave that up to the AI sales guy. Every single idea I have ever passed by GPT is BRILLIANT! I don't know where I'm going with this. At least it wasn't written by AI. ;)
Edit to add: Just use Deepseek Flash 4. You can hit those servers all day for next to nothing and still scratch the itch to build useless things. ;)

by LastTrain

0 subcomment

Yes. If we spend more on building AI infrastructure then current total global gross software sales, the only way the math works is if we create and sell much more software or if we start charging more for it.

by arikrahman

1 subcomments

Deepseek is practically free if you hit cache. Harnesses like reasonix help to alleviate the affordabiliy concern with opinionated oversight.

by zytoon

0 subcomment

This summarizes half of the entire AI scene as these guys generate content to paint the entire world the way like to: US equity markets are facing three IPOs .. each led by a world-class bullshitter”.

by evrydayhustling

0 subcomment

The willingness to throw capital at AI is definitely doing some crazy things, but this article has some bad takes on the data.
> [Ratio of per-token cost to subscription cost] means Anthropic is subsidizing their enterprise customers by up to 40 times, and OpenAI up to 70 times
Actually, they could be subsidizing by more (if they are taking a loss on API), or not at all (if they are soaking API customers by a massive margin).
Separately, these subscriptions get sold to large groups with varying usage, so it's crazy to model assuming every subscription is maxed out. Banks, gyms, and many other businesses work this way, offering consumers flexible access to services that they will realistically use in bursts. It's not always worth the complexity to prevent overuse by a small minority. You can feel like this kind of business model isn't as transparent, but it's silly to pretend it can't work.
> OpenAI spent 44% of their revenue [$5.3B] on sales and marketing! The hype needed to keep the AI bubble inflated is incredibly expensive.
Over that same period (2025), OpenAI added $10B in realized revenue and $14B in run-rate. Sounds like they're getting >2X return within 12 months of those go-to-market dollars. Compare that to like, any other business.
> Thus in recent weeks the idea that Generative AI (LLMs for short) is too expensive has been all over mainstream business media.
Would it be smarter for these companies never to test customers' price tolerance? The quotes following this make it seem like the companies are getting important information about the nature of that price tolerance, and preparing to react. This is the work markets do on both sides to understand the value of a new product.
There are lots of good arguments about AI overinflation, but in order for them to be useful, they have to be rigorous and targeted.

by largbae

0 subcomment

This article gave me an amusing thought: the only jobs with a high enough salary to be profitably replaced by AI might be software engineers.

by Catloafdev

5 subcomments

Affordability is not the current goal.
Vendor lock-in is the current goal. Consumer prices are a drop in the bucket comparatively.

by belZaah

0 subcomment

There’s one more aspect to this. Look at Claude self-reported availability figures. It’s two nines at best, not enough to build something serious on top of. Historically, adding another 9 is an order of magnitude cost shift. Even in best case scenario, where a LLM scales much differently, you are looking at significant cost increases just to achieve something people would be willing to have their business depend on.

by dzogchen

0 subcomment

> To generate the $309 billion needed to service their debt, the AI industry will need to replace 46.8 million jobs, equivalent to around 27% of the current number of jobs in the US.
Lump of labour fallacy spotted.

by zoobab

2 subcomments

Spelling mistake:
"a return on these invetment"

by sleepybrett

1 subcomments

It's funny when you watch the doomscroll all these anthropic guys talking about how you should be writing self-improving loops and that's all they do. Of course that's all they do, they don't have to pay for their tokens.

by HDThoreaun

2 subcomments

I really can’t stand when writers point to the difference in price per token on the api and subscription and use that as evidence that inference loses money. This author even says it’s implausible that the api charges 4x marginal cost when I think it’s very likely even higher than that. The entire rest of the post sits on this faulty assumption. Fixed costs don’t matter when marginal revenue is profitable and growing rapidly. The ai labs only have 2 questions. Can they prevent users from switching to open source models? Can they scale the number of users on enterprise plans the way they did for coding but in a more general way for all knowledge jobs?

by deweywsu

3 subcomments

I know a lot of level-headed engineers here may not side with me, but I say let the companies who abandoned their people at the drop of a hat, with CEOs who waved their flag around on social media, proudly declaring how they'd now run their companies with 75% fewer employees wither and die. If I had been let go, there's no way I'd go back to a company like that, and there should be a black list of CEOs who acted this way established and kept public. These CEOs are not holistic thinkers, and are too susceptible to mass hysteria and too irresponsible to real people and their lives to be trusted with the vision for any company ever again.

by jongjong

0 subcomment

The current situation reminds me of how far we've come from old ideals of delaying gratification today in order to have more later.
It seems like this ideology has been corrupted into a short-sighted "Establish a monopoly position as soon as possible at all costs, don't worry about tomorrow."
It's ironic because monopolizing a sector by investing heavily and suppressing profits used to be a long term move but it seems to have become a short term move as investors are racing each other.

by holyknight

1 subcomments

Most of the "affordability" and "pricing" discussion is pointless because we don't have any real numbers on their margins per token. So, yes, they are subsidizing their subscription plans compared to the API prices, but the API prices could already be stupidly inflated, so the relative price comparison is a nothing burger. Until we know (or at least get a hint) on their margins on API prices, any pricing discussion is pointless.

by trollbridge

3 subcomments

The article fails to mention DeepSeek, Alibaba, Qwen, Xiaomi, MiMo, z.ai, or GLM. It's hard to take such an article seriously that doesn't do this. (Our monthly total spend is around $180 with a team of 6, about half technical; our biggest line items are for American models or subscriptions which we probably will be planning to get rid of.)
And then remarks like this:
```
  Anthropic, OpenAI and Microsoft have all now transitioned customers from subscriptions to token-based pricing.
```
Huh? I use OpenAI via a subscription, as is anyone else using GPT-5.5-Pro who isn't a multimillionaire.

by SirFatty

2 subcomments

"Crisis"

by 1vuio0pswjnm7

0 subcomment

Here are all the references in this blog post
https://sequoiacap.com/article/follow-the-gpus-perspective/
https://sequoiacap.com/article/ais-600b-question/
https://www.wheresyoured.at/brokenomics/
https://www.wheresyoured.at/exclusive-openai-financials/
https://www.wheresyoured.at/news-microsoft-to-shift-github-c...
https://archive.is/m5MHe#selection-1483.0-1483.74
https://www.youtube.com/watch?v=MNQDrF0HjtI
https://www.youtube.com/watch?v=VBHSjzHW-C8
https://www.derekthompson.org/p/the-great-ai-cost-panic-of-2...
https://www.tomshardware.com/tech-industry/artificial-intell...
https://www.tomshardware.com/tech-industry/artificial-intell...
https://blog.dshr.org/2025/10/depreciation.html
https://x.com/ThierryBorgeat/status/2060069195975422281
https://wlockett.medium.com/the-ai-industry-is-panicking-db5...
https://www.sofi.com/learn/content/average-salary-in-us/
https://www.theglobalstatistics.com/united-states-labor-stat...
https://www.bls.gov/news.release/pdf/ecec.pdf
https://www.businessinsider.com/ai-bubble-heads-doomers-sam-...
https://www.wsj.com/tech/ai/openai-considers-drastic-price-c...
https://www.bloomberg.com/opinion/articles/2026-06-11/anthro...
https://arstechnica.com/ai/2026/06/anthropic-pauses-token-ba...
https://x.com/bcherny/status/2040206441756471399?lang=en
https://code.claude.com/docs/en/agent-sdk/overview
https://windowsforum.com/threads/microsoft-plans-june-30-202...
https://www.datacenterdynamics.com/en/news/anthropic-to-use-...
https://techcrunch.com/2026/06/05/google-will-pay-spacex-920...
https://backofmind.substack.com/p/tokenalysis-and-john-henry
HN commenters quickly attack anything from Ed Zitron these days
But this seems to be flying under the radar

by terekhindc

0 subcomment

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by yashthakker

0 subcomment

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by maxothex

0 subcomment

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by prymitive

0 subcomment

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by justincredible

0 subcomment

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by simianwords

8 subcomments

This is basically bunk because AI costs have gone down by 50x or more (api costs) since 3 years.