Why Are AI Token Prices Falling?

Ethan Mollick says AI token prices face real downward pressure because a huge move for token efficiency is underway and costs will decrease even as more compute comes online. Lower cost means AI does more stuff for less money in a very short period of time, so long-term token costs do not worry him.

A chart from Andreessen Horowitz compares the price of compute with the price of tokens. Compute has stayed steady and risen a little, while the price of tokens is falling dramatically. Alex Kantrowitz calls the drop the most deflationary technology he can remember in the price paid for the technology. Use is still rising because agent-style work requires more tokens, and a Fable class model can call a Haiku class model to do work and organize work for lower costs. The token-cost concern will go the way of vibe coding and RAG.