Without Subsidies, Is AI Unaffordable?
Major AI platforms and vendors are subsidizing users' costs in an effort to achieve sector dominance through the network effect, but this model is unsustainable and masks the true costs of AI. Enterprises are currently benefiting from free or heavily discounted AI services, but when subsidies end, they immediately curtail their AI spending due to the high real-world costs and ambiguous payoffs. The unsubsidized costs of AI, including energy and tax subsidies, are likely to be significantly higher than currently presented.
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Subsidised AI looks like the cloud-computing capex binge of 2010-15: free compute lured users, but once discounts vanished utilisation fell 30–40 % in surveyed Indian SaaS firms. The real bill—power draw of 30 TWh for India’s projected 2026 AI servers, plus foregone tax on imported GPUs—will land on balance sheets the moment the VC slush runs dry, turning today’s “efficiency gains” into tomorrow’s asset-price deflation.