Epoch AI estimates the cost of a fixed level of AI performance has fallen about 47% per quarter since 2023, or 13 times a year
AI COSTS PLUNGE 13-FOLD ANNUALLY AS INVESTMENT NEARS $1 TRILLION AI costs have fallen 47% per quarter since 2023, equivalent to a 13-fold annual decline, according to Epoch AI. That's 6 times faster than computing costs and 18 times faster than lithium battery costs. Meanwhile, U.S. and Chinese tech firms are projected to spend nearly $1 trillion on AI infrastructure this year, raising a critical question: Can AI generate enough returns to justify the spending?
Context
Falling costs for the same capability shape how quickly AI spreads and whether the near $1 trillion being spent on infrastructure can pay off.
This item is secondhand and partly resurfaced: Walter Bloomberg is a headline account, and Epoch AI published the underlying report, The plunging price of thought, on September 22. The attached chart credits Epoch AI and Deutsche Bank Research. The $1 trillion spending figure in the post is not attributed to a named source.
Deep dive
On October 14, Walter Bloomberg posted that AI costs have fallen 47% per quarter since 2023, a 13 fold annual decline, according to Epoch AI, which he said is 6 times faster than computing costs and 18 times faster than lithium battery costs.
The Epoch AI report, by Luke Emberson and David Roodman, measures the cheapest cost of reaching a fixed score on five math, science and game benchmarks rather than total AI spending. It says the price of a given level of performance fell about 47% a quarter, with slower declines on game puzzles at 39% to 43% and faster ones on math at 50% to 52%. Epoch writes that this is four times faster than DNA sequencing, six times faster than compute, 18 times faster than lithium batteries and 54 times faster than electricity in the century to 1973.
Epoch also finds declines are steepest when a level of performance is new, about 66% a quarter, slowing to about 32% two years later. The report notes caveats including benchmark gaming, imperfect transfer to real tasks and users who do not stay on the cheapest options.
The post adds that US and Chinese tech firms are projected to spend nearly $1 trillion on AI infrastructure this year and asks whether AI can earn enough to justify it.
What to expect next
Watch whether Epoch updates its estimate as new models arrive, and whether the decline slows as its own data on older capabilities suggests.
Also watch how falling costs per task interact with rising usage, since cheaper reasoning can push total spending up, which matters for the debate over whether the AI infrastructure buildout earns a return. Epoch's next update will show whether the pace holds.