AI excitement turns to pain for Big Tech as profits hard to come by; check out the numbers
Ever since the advent of generative artificial intelligence (AI), many experts have highlighted the potential problems with this technology, ranging from misinformation to the destruction of humans through superintelligence AI. However, many failed to see the most critical problem with AI, one that is proving to be destructive to its own growth – the economics of scale. As per reports, major tech firms are struggling to turn their AI businesses into profit despite the massive excitement from consumers as it is very costly to keep AI products operational.
According to a report by The Wall Street Journal, AI tools which are unproven in terms of market durability, can be quite expensive to run as they require robust servers with expensive chips that consume lots of power. In particular, the cost related to power is very tricky since AI does not work like other software products. Answering each query will require the AI to run a specific algorithm which can use up more energy depending on how complicated the query is. That means heavy users in particular can push the cost to the company quite high.
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As per the report, Microsoft is losing a significant amount of money on its GitHub Copilot, an AI assistant that helps coders create, fix, and translate codes. More than 1.5 million users have used it so far, and have paid $10 a month for the service. However, the company is actually losing a whopping $20 per user per month, and some users were even costing the company as much as $80, the report quoted unnamed sources as saying.
These are untested waters, so pricing troubles were expected. However, it appears companies were not prepared for the costs to run so high, because just like other
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