The Inference Economy: Why demand matters more than supply
10 days ago
- #AI
- #LLM
- #Token Economics
- The inference economy is experiencing changes in token demand, driven by increased usage and higher token consumption per request.
- Quality improvements in LLM outputs require more tokens, as applications use LLMs for preprocessing data, reranking, and analyzing relevance.
- Median and p99 token consumption are rising rapidly, leading to higher costs, with no signs of this trend reversing.
- Strategies to manage token demand include using appropriately sized models for tasks, being flexible with providers, and avoiding unnecessary reasoning models.
- Fine-tuning and post-training are complex and not always viable solutions for reducing token costs, despite recent hype.
- Businesses should focus on both reducing costs and leveraging potential pricing power as AI applications mature and demonstrate clear ROI.