AI's Great Expectations: Token Prices Crash 40% But Enterprise Spend Explodes 50% – Jevons Paradox Just Kicked In

Despite the competition from cheaper 'almost frontier' models from China, Citadel Securities’ head of macro strategy, Frank Flight, remains optimistic for the broader (western) AI ecosystem.

 In the following notes, he argues that the AI boom’s lofty valuations hinge on demand elasticity - whether cheaper intelligence expands consumption enough to sustain revenues - and recent data suggests it does: usage-weighted token prices have fallen ~40% since late June while top-1% firms’ AI spend per employee jumped nearly 50% month-over-month in July (Ramp), GPU rental markets have rebounded from June lows, and hyperscaler cloud revenues continue to absorb new capacity rapidly, pointing to classic Jevons Paradox dynamics in which falling costs drive higher usage rather than collapsing the ecosystem.