Why AI Keeps Getting Cheaper (and What That Means for Your Business)

A few years ago, if you wanted an AI system to read every customer email, draft replies, and summarize your week, the answer was: sure, if you're Delta Airlines. The compute cost alone would have eaten a small business alive.

That math has changed. And it's still changing, month by month.

What just happened

In late 2025, Alibaba priced its Qwen models at around $2 per million tokens for near-frontier performance - a level of capability that would have cost tens or hundreds of times more just eighteen months earlier. OpenAI, Anthropic, and Google have all cut prices repeatedly over the same window. GPT-4-class intelligence, which cost around $30 per million tokens when it launched in 2023, is now available in newer models for a fraction of that.

To translate "tokens" into plain English: a token is roughly three-quarters of a word. A million tokens is about 750,000 words - the length of six novels. For $2, an AI system can now read and respond to the equivalent of six novels' worth of text.

A typical customer email exchange - question, answer, follow-up - uses maybe 2,000 tokens total. Do the arithmetic and the AI cost of handling one is now measured in fractions of a cent.

Why prices keep falling

Three things are happening at once:

• Better models are getting smaller. Techniques like distillation let a big, expensive model "teach" a smaller, cheaper one to do most of the same work. The small model runs at a fraction of the cost.
• The hardware is catching up. Nvidia, AMD, and a wave of specialty chip startups are all racing to serve AI workloads more efficiently. More supply means lower prices per query.
• Competition is fierce. Alibaba, DeepSeek, Meta's Llama models, Mistral - there are now credible open-weight options that force the closed labs to keep cutting prices to stay competitive.

None of these trends is close to running out. The most reasonable base case is that the AI you're paying for today will cost less next year, and less again the year after.

Why this actually matters for a small business

Cheaper AI doesn't mean much on its own. What it means in practice is that the tools built on top of AI - the ones you actually use - become affordable at a scale they weren't before.

Two years ago, an AI assistant that could hold a real conversation, work from your own documents, and draft answers in your voice was enterprise software. It was priced for insurance companies and airlines. Today, that same capability is within reach of a ten-person company, and the underlying cost keeps falling.

The same is true for drafting tools, follow-up reminders, meeting summaries, and assistants that search your own files - all of it. The AI portion of the cost is now small enough that these tools stand or fall on whether they're built well, not on whether the model behind them is affordable.

The catch: cheaper models don't mean cheaper implementation

Here's the honest part. Microsoft spent about $2.5 billion on internal AI deployment in 2024–2025 and concluded that the real bottleneck isn't access to models - it's implementation. Getting AI to actually do useful work inside a specific business takes real effort: connecting it to your calendar, your customer records, your pricing rules, your service area, the way you actually talk to customers.

If Microsoft, with essentially unlimited engineering resources, decided the hard part is implementation, that tells you something. It's not the AI. It's the wiring around the AI.

Which is exactly why the "buy an AI tool and figure it out yourself" approach so often fails for small businesses. The model is cheap. Making it work in your business isn't a model problem - it's a setup problem.

What to actually do about it

You don't need to track token prices or read model release notes. What you should take away is this: the cost objection to AI ("we're too small for that") is genuinely outdated. It was true in 2022. It's not true now, and it gets less true every quarter.

The question worth asking isn't whether the technology is affordable. It is. The question is whether someone can set it up properly for the way your business actually runs - your workflows, your customer type, the software you already use.

If you want more plain-English pieces like this, the blog has a Friday digest that sums up each week's posts.