Companies can create valuable products for their customers using AI, but how can they achieve consistent profitability? If you use AI, are you paying for it? Why is AI so costly to provide? Will AI go away if companies providing the service can’t make a profit?
While some companies associated with AI are doing well, many dedicated AI firms are struggling to turn a profit. Despite AI's vast versatility and potential use cases, selling it as a stable commodity to individual users or businesses has proven challenging.
Generative AI Is Expensive
The costs associated with developing and running generative AI models are substantial. According to the Stanford 2025 AI Index Report, corporations invested over a trillion dollars into AI between 2020 and 2024. This massive upfront expense alone must be recouped before these corporations can achieve profitability.
Furthermore, these figures do not include the significant operational expenses required to run generative AI models. Most well-known generative AI models, such as those from OpenAI, feature power- and chip-intensive capabilities with relatively high computational costs for each generated response.
The Harvard Business Review has estimated that generating a single image using AI can cost several cents, a stark contrast to the near-zero cost of standard computing services for the provider. These high barriers to entry and ongoing maintenance costs intensify the pressure on AI development companies to achieve profitability.
Who Will Pay for AI Products?
The same Stanford report found that AI has reduced costs by 23% to 49% for businesses that use it, depending on the industry. Several business sectors also reported increases in revenue from AI. While these improvements in costs and revenue might not be "game-changing," the widespread benefits indicate a strong desire across industries to integrate the technology.
Despite this clear business value, consumer adoption remains a challenge. A survey by Menlo Ventures found that while a majority of U.S. adults use AI, only 19% use it daily. Crucially, a mere 3% of those users pay for their AI usage. This disparity begs the question: How are these generative AI companies generating revenue?
The primary revenue sources for generative AI companies currently come from corporate partnerships and licensing fees, supplemented by smaller streams like premium subscriptions (e.g., OpenAI Plus).
This strategy has not yet been enough for major players to guarantee a profit. OpenAI reported approximately $5 billion in losses in 2024 on revenues of $3.7 billion. In the first half of 2025, while revenues grew to $4.3 billion, operating losses reached an estimated $7.8 billion, nearly doubling the losses from the entirety of 2024.
The current subscription model prevalent across many industries appears ill-suited for generative AI companies due to the technology's high operating costs. This is the main reason even paid subscriptions often impose usage limitations.
With genuinely unlimited usage, these companies could hypothetically lose money on their paying customers. Simply increasing subscription costs does not resolve the problem, as most people are currently unwilling to pay higher prices for greater usage. The Harvard Business Review views this dynamic as unsustainable, suggesting an evolution is required in how these products are sold and provided to customers.
Why It Matters
AI is one of the fastest-growing technologies globally and is unlikely to disappear anytime soon, even if current generative AI powerhouses fail. The industry is actively learning how to develop and, more importantly, how to profitably sell its product.
It is vital to recognize that success in developing a groundbreaking product does not automatically translate to success in selling it. On the other hand, the industry's current failures to achieve profitability do not mean success won't be possible in the future.
The desire for the product from both consumers and developers is clearly present; the market just needs to find a sustainable model.
About Us | Get the Bedel Blog | More Artificial Intelligence Articles
Schedule a Consultation
We have helped our clients answer these questions and more. If you want a clear understanding of your financial future, and need help making changes to reach your goals, schedule a consultation and we can get started.
The material has been gathered from sources believed to be reliable, however Bedel Financial Consulting, Inc. cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. To determine which investments or planning strategies may be appropriate for you, consult your financial advisor or other industry professional prior to investing or implementing a planning strategy. This article is not intended to provide investment, tax or legal advice, and nothing contained in these materials should be taken as such. Investment Advisory services are offered through Bedel Financial Consulting, Inc. Advisory services are only offered where Bedel Financial Consulting, Inc. and its representatives are properly licensed or exempt from licensure. No advice may be rendered unless a client agreement is in place.
