Why it matters: Companies that rushed to embrace AI are now confronting ballooning IT costs, uncertain productivity gains and growing employee skepticism.
Driving the news: Microsoft canceled most of its Claude Code licenses, in part over costs, according to The Verge, and Uber’s COO said AI costs are getting “harder to justify.”
An AI consultant tells Axios one of their clients recently spent half a billion dollars in a single month after failing to put usage limits on Claude licenses for employees.
Companies are citing AI's ability to automate jobs as a cause for layoffs, though Anuj Kapur, CEO of CloudBees, told Axios that workforce cuts may simply be "the only lever they can pull" to offset their AI bills.
Consumer sentiment around AI is also nosediving, and employees are rebelling against the use of the technology at work.
What they’re saying: The enterprise is undergoing a “healthy swing” away from AI overuse — or “tokenmaxxing,” the push to burn as many AI tokens as possible — Ali Ansari, CEO of model training firm Micro1, told Axios.
Ansari hopes this correction will push companies toward more efficient AI use.
While the market views these tools as working equally well across the enterprise, Ansari says "the reality of AI right now is that it only works for coding."
That disconnect can drive up IT bills without leading to high return on investment in agents, he said.
Friction point: Corporate AI adoption is running into four unique problems.
Use cases: "Most people default to automating tasks they dislike rather than tasks most valuable to the company," Sophia Velastegui, CEO of Velastegui Ventures and former chief AI officer at Microsoft told Axios. Instead, they should focus on using AI to drive revenue.
Costs: One CTO told Axios that employees were using AI models to check the weather. That gets expensive fast: Enterprise AI plans are not truly 'all you can eat,' and even simple chatbot queries can carry heavy token costs.
One CTO told Axios that employees were using AI models to check the weather.
Is that not what every AI proponent has been telling everyone to do?
Why pull up your calculator app to find out what 12+17 is? Just ask the AI. Why use Ctrl+F to find keywords in a document when you can upload the document to the AI and have the AI find those words in it for you? Why look out the window when you can just ask the AI what the weather is like outside?
We’ve been telling them all along that this kind of shit is incredibly stupid and wasteful, both in monetary, but also in social and environmental costs. Are they just now finally starting to catch on?
Mind you, the people who are pushing to replace everything with LLMs are not the people who spend half a billion bucks on tokens in a month. They’re the ones who charge half a billion bucks and the ones who charge them for the hardware. As far as they are concerned, that half a billion dollar bill is a rousing success they’d like to see repeated as often as possible.
Okay, and then there’s the useful idiots who vibecode a 50 kLOC basic CRUD application with broken auth in two days and conclude that LLMs can craft arbitrarily complex applications instantly at near-zero cost. And then proceed to shill the stuff every chance they get because these days the internet is all about hyping yourself up and they can pretend that their finely-honed 1337 prompt crafting skillz will make them as god-kings among peasants when vibecoding will inevitably subsume all other forms of development, nay, all forms of creative work entirely!
While remaining cheap, of course, because nobody has ever offered a service for cheap and then made it more expensive.
Mind you, the people who are pushing to replace everything with LLMs are not the people who spend half a billion bucks on tokens in a month.
That would be true in a more sane world, but I’m not sure it’s true in reality. Lots of companies are paying for AI access but are forcefully pushing their employees to incorporate AI into their workflows anyway. The point of this article is that it’s finally starting to hit home how poorly thought-through that is from the side of the AI customers.
Even fucking railroads. They were building tens of thousands of kms of railroad to literal nowhere. “Towns will settle as long as you build a station and run a service there!”
Which is partially true in land that was a PITA to get to, and couldn’t access lucrative markets. I.e. a lot of prairie in the Midwest, which only truly settled around rail due to grain elevators and a more structure co-op system.
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Is that not what every AI proponent has been telling everyone to do?
Why pull up your calculator app to find out what 12+17 is? Just ask the AI. Why use Ctrl+F to find keywords in a document when you can upload the document to the AI and have the AI find those words in it for you? Why look out the window when you can just ask the AI what the weather is like outside?
We’ve been telling them all along that this kind of shit is incredibly stupid and wasteful, both in monetary, but also in social and environmental costs. Are they just now finally starting to catch on?
Mind you, the people who are pushing to replace everything with LLMs are not the people who spend half a billion bucks on tokens in a month. They’re the ones who charge half a billion bucks and the ones who charge them for the hardware. As far as they are concerned, that half a billion dollar bill is a rousing success they’d like to see repeated as often as possible.
Okay, and then there’s the useful idiots who vibecode a 50 kLOC basic CRUD application with broken auth in two days and conclude that LLMs can craft arbitrarily complex applications instantly at near-zero cost. And then proceed to shill the stuff every chance they get because these days the internet is all about hyping yourself up and they can pretend that their finely-honed 1337 prompt crafting skillz will make them as god-kings among peasants when vibecoding will inevitably subsume all other forms of development, nay, all forms of creative work entirely!
While remaining cheap, of course, because nobody has ever offered a service for cheap and then made it more expensive.
That would be true in a more sane world, but I’m not sure it’s true in reality. Lots of companies are paying for AI access but are forcefully pushing their employees to incorporate AI into their workflows anyway. The point of this article is that it’s finally starting to hit home how poorly thought-through that is from the side of the AI customers.
We do this with every single new revolutionary technology.
Pets.com
Computer boom and busts
Even fucking railroads. They were building tens of thousands of kms of railroad to literal nowhere. “Towns will settle as long as you build a station and run a service there!”
Which is partially true in land that was a PITA to get to, and couldn’t access lucrative markets. I.e. a lot of prairie in the Midwest, which only truly settled around rail due to grain elevators and a more structure co-op system.