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Or sign-in if you have an account.AI usage is growing so fast that businesses are now paying more than ever through the use of tokens. Photo by Getty Images/iStockphotoTechnology executives have long predicted the cost of artificial intelligence would fall as the technology becomes more advanced and its use becomes more ubiquitous and that has come true in a sense: AI adoption is growing, data centres are being built to expand computing power and the costs of running an AI model known as inference is dropping.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorBut AI usage — particularly for the most sophisticated tasks — is growing so fast that businesses are now paying more than ever through the use of tokens, which are the building blocks of data that a large language model reads and produces.In a now-viral example, one company reportedly spent US$500 million in one month on Claude licences from Anthropic PBC, according to the Axios news site. Other companies are withholding employee raises as a result of their unexpected AI spending or saying that human employees are now cheaper to hire than deploying AI.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againHere’s everything you need to know about AI tokens, why AI bills are soaring and what companies are doing about it.AI tokens are the basic units of text or data that AI models, such as OpenAI Inc.’s ChatGPT, Anthropic’s Claude and Google LLP’s Gemini, use to process language in order to create text-based answers, lines of code and images.For example, if a software engineer asks Claude to produce lines of code for a project, Claude will break down the prompt into smaller units of data that allow it to understand the request and generate output.Complex tasks such as coding or creating agentic AI workflows — whereby AI agents carry out multi-step requests with minimal human intervention — eat up tens of thousands or even hundreds of thousands more tokens than a simple chatbot query, Andrew Forde, head of AI in Canada at KPMG LLP, said.“If you’re writing a new piece of software, you could hit 150,000 tokens versus 100 tokens for a paragraph-long text response (from an AI),” he said.Users are charged for both input and output tokens, so companies pay for every request or prompt their employees ask AI as well as the resulting response.Businesses are increasingly asking AI to take on more sophisticated requests such as coding and agentic AI, so the sheer amount of tokens being consumed by corporate users is skyrocketing.“It is orders of magnitude higher to do the workflows that businesses are starting to experiment with,” Forde said. “When you start to do more agentic work, where you have multiple AI agents going off and doing deep work to get the outcome you asked for, this has a steep cost in usage.”For example, Royal Bank of Canada — the world’s third-most advanced bank in AI, according to the Evident AI Index — said its AI token use jumped more than 500 per cent in its second quarter.Shopify Inc. chief technology officer Mikhail Parakhin, during an April podcast, said the company has now hit 100 per cent daily AI tool usage across its staff and that it funds “unlimited tokens for everybody.”And Google said it’s processing more than three quadrillion tokens every month, a seven-fold jump from a year ago.In Silicon Valley workplaces, token consumption has become a measure of productivity, with engineers and employees burning through as many tokens as possible — an act called tokenmaxxing — to prove their productivity and commitment to AI.Nvidia Corp. chief executive Jensen Huang said well-paid engineers should be maxing out their token spend.“If that $500,000 engineer did not consume at least $250,000-worth of tokens, I am going to be deeply alarmed,” he said on the All-In podcast in March.The price of AI tokens has plunged since the launch of ChatGPT in late 2022.“Pre-ChatGPT, roughly one million tokens of cognition would cost you $20,” Forde said. “By 2023, that dropped again, and at present day, it’s around eight cents.”But early AI developers such as Anthropic are moving from flat-fee models designed to hook users on AI to usage-based pricing.“Now that they’re starting to get critical mass, their strategy is running it like a utility,” Forde said.As a result, he said AI costs are growing, with some companies maxing out their annual AI budgets in a few months.For example, cybersecurity company Palo Alto Networks Inc. used Anthropic’s Mythos AI model to check its code for vulnerabilities and ended up burning through US$1 million in tokens “very quickly,” a company executive told the Information news site.Surging AI costs could widen the AI adoption and return on investment gap between big and small businesses, Forde said. Large companies can negotiate committed-use discounts because of their size and are often able to build infrastructure and invest in AI capabilities of their own to control costs and absorb price volatility. Smaller businesses pay closer to the going rate.Roger Kirkness, co-founder and chief executive of Toronto-based Convictional Inc., which makes organizational workplace tools, said investor funds have helped cushion AI’s rising sticker shock, with his company’s AI spend surging threefold since the start of the year, driven by growing software engineering-related token burn.“Companies without investor backing would find it harder to absorb these costs ahead of revenue,” he said, adding that token spending favours “well-funded companies” that have the resources to align the work of AI agents to business goals.Goldman Sachs Group Inc. predicts AI token consumption will multiply 24 times to 120 quadrillion tokens per month between 2026 and 2030.Businesses are now trying to figure out how to hedge against “sustained pressure,” Forde said, with prices likely to remain volatile in the near term.Some execs are attempting to rein in costs by setting AI usage limits. For example, Uber Technologies Inc. has implemented a monthly cap of US$1,500 in AI token spending per coding tool.Most banks, meanwhile, are calling for greater oversight on token consumption, but aren’t rationing AI use, Colin Gilbert, head of intelligence at researcher Evident Insights Ltd., said.He said one popular strategy is for companies to reserve the most advanced and expensive AI models for complex and agentic workflows and deploy smaller and cheaper models for simpler tasks — a tactic called “model-routing.”Kirkness said Convictional is currently evaluating whether it can shift certain types of work to cheaper device- and cloud-based models, while OpenAI chief executive Sam Altman has said the company is looking at how to make its models more efficient and “help people get more value for less spend.” Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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