AI costs will drop 10 times each year, predicts Altman
What's the story
Sam Altman, the CEO of OpenAI, has predicted a drastic reduction in the cost of using artificial intelligence (AI).
In a recent blog post, he said that "the cost to use a given level of AI falls about 10x every 12 months."
The prediction comes after OpenAI announced Stargate, a $500 billion project to invest in AI infrastructure.
Cost comparison
Altman compares AI cost reduction to Moore's law
"You can see this in the token cost from GPT-4 in early 2023 to GPT-4o in mid-2024, where the price per token dropped about 150x in that time period," wrote Altman in his blog post.
"Moore's law changed the world at 2x every 18 months; this is unbelievably stronger," he added.
Intelligence growth
AI tech directly proportional to development resources: Altman
In his post, Altman also claimed that an AI model's intelligence is directly proportional to the resources put into its development.
He hinted that "you can spend arbitrary amounts of money and get continuous and predictable gains."
He further predicted that there would be "no reason for exponentially increasing investment to stop in the near future" as AI models are getting smarter at a super-exponential rate.
Societal implications
Altman anticipates significant societal impact from AI trends
Altman highlighted the potential societal impact of these AI trends, saying "if these three observations continue to hold true, the impacts on society will be significant."
He proposed that as intelligence and energy costs decline, the prices of many goods could plummet.
However, he also warned that the price of luxury goods and scarce resources such as land could rise.
Market response
AI market reacts to cost predictions and new investments
The AI market has been quite active in light of these predictions. In January, a sell-off of AI-related stocks was triggered by DeepSeek, a Chinese start-up offering high-performing yet affordable models.
This raised concerns about potentially reduced demand for AI hardware like NVIDIA's chips.
Meanwhile, tech giants like Amazon, Microsoft, Google, and Meta are ramping up their AI investments with combined capital expenditures expected to exceed $320 billion this year.