Palo Alto CEO: AI Token Costs Must Drop 90% for Adoption

Palo Alto Networks CEO Nikesh Arora says AI token costs need to drop by 90% for widespread business adoption. This statement came despite OpenAI's CEO, Sam Altman, reporting a 54% increase in token efficiency for their newest model. Arora believes the 54% improvement is just a start, suggesting another 20% efficiency gain is needed within the next year. He aims for that 90% reduction within two years. Rising token costs are a major concern for businesses trying to budget for AI tools. Palantir CEO Alex Karp has also criticized the current token pricing model, suggesting open-weight models might be a better solution. This pricing pressure is already pushing some businesses toward cheaper open-weight alternatives. Meanwhile, AI infrastructure spending continues to reach new highs, with companies like SpaceX and Amazon raising billions for AI investments. Arora remains confident that these costs will rationalize over time due to infinite demand. This matters because the cost of AI impacts how quickly and widely businesses can adopt these new technologies.