Tech giants like Microsoft Corp (NASDAQ: MSFT), Alphabet Inc's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google, and Adobe Inc (NASDAQ: ADBE) are navigating the challenges of monetizing generative artificial intelligence (AI) tools.
These AI technologies, capable of generating business memos and computer code, are costly due to their need for powerful servers and energy-intensive chips. Microsoft reportedly incurred losses on one of its initial generative AI products, the Wall Street Journal reports. Companies are introducing AI-backed software upgrades with increased price tags to counteract these costs.
The cost of operating these AI models has been a concern for customers. Adam Selipsky, CEO of Amazon.com Inc (NASDAQ: AMZN) Amazon Web Services, noted the industry's broader dissatisfaction with the expenses of running AI models. The development and maintenance of AI products can be financially and time-intensive, lacking the economies of scale typical of standard software.
Microsoft partnered with OpenAI to launch GitHub Copilot, a popular service among coders for its efficiency in programming. However, the service has not been profitable due to the high operational costs. Users pay a monthly fee, but the company's expenses per user exceed the subscription cost. Microsoft plans to charge an additional fee for its upcoming AI software upgrade, a strategy also adopted by Google.
To manage costs, Adobe introduced a credit system for its AI image generator, Firefly. The service's speed reduces once users exceed their monthly credit allocation. Companies anticipate reducing generative AI costs, attributed to technological advancements like new chips, over time.
Price Actions: Microsoft shares traded lower by 0.36% at $326.17 on the last check Monday.