Why Falling AI Token Prices Don’t Mean Lower Costs

Despite rapidly falling per-token prices for LLM inference—dropping over 10x per year in some cases—total AI spending is rising because token consumption per task is growing even faster. Modern AI systems use multi-step reasoning, tool-calling, and agentic workflows that can consume millions of tokens per task. As a result, companies like Notion are seeing margin pressure even as unit costs decline, creating a 'cost illusion' where cheaper tokens mask higher overall bills.