The Silicon Data LLM Token Expenditure Index, a key gauge of what users pay for artificial intelligence tokens, has declined almost 20% from its May peak after nearly doubling since its inception in December. This drop comes as markets question whether massive investments in AI will yield returns.
Index Decline Raises Concerns About Pricing Power
For stock investors, the weakening index could signal that AI companies are losing pricing power with increasingly cost-sensitive customers, potentially undermining expectations for an AI windfall. The index, which tracks token spending, is the clearest measure of the $700 billion-plus capex boom driving the sector.
“There are increasing reports that users of AI solutions, priced in tokens, are having to restrain unlimited use due to high costs,” said veteran investor Louis Navellier. “The chatter that OpenAI is pushing back its IPO to next year is seen as a sign that, currently, profitability remains a problem.”
Interpreting the Dip: Multiple Scenarios
A softer index does not necessarily mean AI is getting cheaper. The gauge blends prices and usage, so a dip could indicate falling list prices, a shift toward cheaper models, or a genuine softening in buyer willingness to pay. Silicon Data, which built the index, warns against reading it as a simple price tag, calling it a proxy for marginal willingness to pay.
On the bullish side, token prices have collapsed over 90% since 2023, but total spending has roughly doubled since last year as cheaper tokens expanded the market. An index pause could simply reflect digestion, with demand real and capex well spent. This supports the bull case for Nvidia Corp., memory makers, and data-center stocks.
Bearish Interpretation: Risks of Sustained Weakness
Bears argue that sustained weakness in the index could end the rally that has lifted nearly the entire AI cohort. Token spending justifies the next capex order, and the bill already looks stretched. Allianz Research reports a nearly 46% growth gap between AI investment and sales, worse than the 32% divergence during the 2001 telecom bust.
Fortunately for bulls, the downward trend has paused. It is too early to call a bottom after one flat week, but it keeps the case for a rebound alive. “During the training phase, the cost of AI infrastructure and token generation is extraordinarily high, but in the current inference stage, the economics are significantly better,” said David Miller, senior portfolio manager at Catalyst Funds. “The net use of AI delivers a positive return on investment for companies, at least over the long term.”
Regulatory Headwinds Add Pressure
A demand-side factor also supports the bearish read: Washington’s newfound willingness to exert control over the AI industry. The U.S. government recently removed foreign access restrictions on Anthropic PBC’s Fable 5 model, days after regulators requested OpenAI to stagger the rollout of an upcoming release.
