AI's Dirty Secret: The Companies Selling You AI Might Be Losing Money

Illustration: the unit economics of AI

AI feels like a licence to print money — sky-high valuations, breathless demand. But peer at the unit economics and a surprising picture emerges: for many products, every query you run might be sold at a loss. Welcome to AI’s margin problem.

The uncomfortable math

Running a large model isn’t like serving a web page. Each response burns real compute on expensive hardware. When a company charges a flat monthly fee for “unlimited” use, the heaviest users can cost far more to serve than they pay — and those costs scale with usage, not with a one-time build.

Why inference is so expensive

The bill is dominated by specialized chips, power, and cooling. Bigger models and longer answers cost more per request. Unlike traditional software, where serving one more customer is nearly free, AI carries a stubborn marginal cost that doesn’t vanish at scale.

Who’s subsidizing it

Right now, investors. Many AI products are priced to win market share, not to make money — a land-grab funded by capital betting that costs will fall and prices will hold. Sometimes both happen; sometimes the music stops.

What it means for you

Enjoy the subsidized era, but plan for change: free tiers may shrink, “unlimited” may gain limits, and prices may rise as the market matures. Build so you can switch providers, and don’t assume today’s pricing is forever.

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