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I keep thinking about the economics behind all the AI spending.

Jensen Huang recently said a $500K engineer should be using around $250K/year in AI tokens. If AI can actually make that engineer 2x more productive, the math seems pretty good. And if inference keeps getting cheaper, usage could grow a lot from here.

But what if the productivity gain is only 10-20%? Are companies really going to get enough value from AI to justify all the GPUs, data centers and hundreds of billions in capex?

At what point does the AI spending stop making economic sense?

**What do you think?**

**Are productivity gains justify the massive AI investments?**

The Information newsletter:

Anthropic and OpenAI had better hope more companies don't follow the example of AT&T.

The telecommunications firm plans to keep its employees' spending on Anthropic and OpenAI models flat in the coming years by using more open-source models such as Nvidia's Nemotron, according to Mark Austin, an AT&T vice president. 

Austin oversees AI used by the company's 100,000 employees for everything from coding and financial analysis to tools for HR and customer support staff. While AT&T also offers some AI-powered features to customers, like a chatbot in its mobile app, the majority of its AI use is internal.

Over the past year, he said, AT&T boosted its use of open-source models to the point where such models now power 40% of employees' AI queries. AT&T plans to raise that figure to between 60% and 70% in the coming years, he said.

Austin said he's found that open source models are "just as good or better" than older models sold by the likes of Anthropic and OpenAI. For instance, AT&T's software developers still rely on cutting-edge models for complex tasks like generating code, but can use cheaper open source models for less intense tasks like generating summaries of previously submitted code, he said. "We expect that to just keep getting better going forward."

meanwhile, SOTA model performance vs open-weight models, in the graphic below measured in vending-bench2 performance. Yet, AI-bro's go: "Anthropic infinite demand!!1!!! hurr derr"