"The theory is basically this - AI is mostly free. Huge majority of the people, more than 99 out of a hundred people use it every day for free. And there really aren't any other business models that exist, that have been successful, incredibly successful for years and years and years don't have a large number of paying customers. Either millions of people paying you know, sort of some money, maybe it's $10."
"Although it's worth noting there is a distinction between profitable firms like Nvidia, which sells hardware, and pure-play AI software companies that lack viable monetization paths. Microsoft may be able to profit off of products such as XBox, but many question how it can achieve returns on their trillion-dollar AI investments unless they develop scalable revenue streams. AI providers cannot survive indefinitely without user fees or enterprise licensing models,"
Most AI users access tools for free, leaving many AI software companies without recurring consumer revenue. Hardware vendors such as Nvidia generate profits through chip sales, creating a separation between profitable infrastructure vendors and pure-play AI software firms. Large technology companies that invest heavily in AI face pressure to find scalable revenue streams to justify trillion-dollar investments. Sustainable monetization options include consumer subscriptions, enterprise licensing, and paid features, but widespread free usage undermines those paths. Without sufficient paying users or enterprise contracts, the sector faces the risk of a financial correction if adoption fails to translate into revenue.
Read at 24/7 Wall St.
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