3 August 2025
Topic: Companies And Business
Tokens are getting more expensive
Article URL: https://ethanding.substack.com/p/ai-subscriptions-get-short-squeezed Comments URL: https://news.ycombinator.com/item?id=44775700 Points: ...
TL;DR
The assumption that 'models getting cheaper' will bail out consumer AI margins is flawed, as demand for high-quality models is constant and the costs for running them have exponentially increased due to the growth in token consumption and usage.
Key Takeaways:
Key Takeaways:
- Demand for high-quality AI models is constant, and users are willing to pay for the best, regardless of cost, leading to unsustainable business models.
- The costs for running AI models have exponentially increased due to the growth in token consumption and usage, making it unrealistic for companies to rely on cheaper models to recover margins.
- Companies like Replit are exploring vertical integration to capture value at every layer of the stack, while others may need to consider usage-based pricing or switching costs to achieve profitability.
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