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The price of AI is crashing faster than the rate of Moore's Law, report suggests
Vendor loyalty and subscription schemes have limited appeal when prices can fall so fast.
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A new report from AI research firm Epoch AI suggests the price of artificial intelligence has fallen by thousands of times in recent years — faster than any other transformational technology in the past century. The report suggests that the cost of artificial intelligence is just under 50% cheaper every quarter, and 13 times cheaper per year.
That's faster than lithium batteries, faster than DNA sequencing, and even faster than compute, which has been benefiting from the rapid advancements from Moore's Law for much of the past century
Although these falling costs are likely aiding adoption, it raises difficult questions about the necessity of remaining tied to frontier AI development, and could make it harder for third-party AI services to build customer loyalty and consistent revenue.
If you know that at any given time it's only a few weeks or months before the service you're interested in is going to be more capable and cheaper, what's the incentive to adopt it right now? If a competing service offers something better and cheaper, why stay with your current provider?
That poses a difficult conundrum for labs like OpenAI and Anthropic, which are racing towards ever greater AI capabilities. As the report suggests, finding large profits even with advanced models that outstrip the competition is difficult to imagine when it may only be a fleeting advantage.
Epoch's report paints a stark picture of the relative cost of what it terms "artificial thought." It shows the cost of AI falling by hundreds of thousands of times within just five years. Comparatively, it shows the price of Lithium Batteries between 1991 and 2024 as falling just 100 times over that near-25 year period. Compute fell the most over its lifetime, dropping 100s of billions of times over 60 years from 1940.
This is particularly relevant considering Moore's Law has remained a relevant constant throughout much of the past 60 years. With compute performance and efficiency improving by notable margins every year, the compound effect is modern computers that are both dramatically faster than their predecessors and vastly cheaper to run when measured against their compute capabilities.
AI performance and costs for that performance are falling even faster.