The AI Subsidy Era is Over

**Nathaniel Whittemore** (0:00)
Today on the AI Daily Brief, AI's subsidy era is coming to a close.
Today, we're exploring the implications for everything from markets to job displacement to how your company uses AI.
The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI.
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While you're at aidailybrief.ai, you can also find out about all the things going on in the ecosystem. Big one I would point you to, of course, is the new Agent OS, Agentic Operating System, free self-paced training program. It's been two days, more than 2,000 of you have signed up. You are very clearly interested in building Agentic Operating Systems for good reason. Go check it out. Again, you can find a link on aidailybrief.ai.
And finally, if you want a more practical bent to this conversation, at the end of the episode, I talk about five practical moves for enterprises to bring agents online in this new cost era. There is a companion document at play.aideailybrief.ai that has those five steps that you can get a checklist for. For this episode, we are going main only. We will be back with the headlines tomorrow. Today, we are talking about what is a fairly significant secular shift in the AI space. To put it simply, it is increasingly the case that when you pay for AI, you will be actually paying for what the AI costs. Now, you might be sitting there thinking, wait, isn't that exactly what I've been doing? Especially if you're on one of these expensive $200 a month plus plans. It turns out that even those expensive plans, in many cases, are not actually covering the cost to serve you the AI you're using. And as we move deeper into the agentic era, the price reckoning is finally here.
Now, this has been bubbling for some time. There have been indicators for a while that at least power users well more AI than even the most expensive models accounted for. Some pointed to the fact that this is a pretty standard part of the venture-backed cycle, where in the early days a company can serve things unprofitably because they are subsidizing their product or service with venture capital. Just last week, The Verge published a piece, You're About to Feel the AI Money Squeeze. Ads, rate limits, feature restrictions, price hikes, the AI free ride is over.
That article, like many others, did connect this back to one of the last times we saw something like this, which was the 20 teens and what some, like the Atlantic's Derrick Thompson, called the Millennial Lifestyle Subsidy. In that version, people were surprised when the Ubers that they took and the DoorDash fees that they used rose fairly significantly, pretty fundamentally changing their cost of living. Still, if there is some relation in the pattern, what we've got going on with AI is different both in that, that Millennial Lifestyle Subsidy was largely about what should have been luxury goods being priced like commodity goods, whereas the usage of these AI tools is increasingly deeply interwoven with how we actually work. There's also the fact that AI is playing at a size and a stakes that is totally different than anything we've seen in startups before.
If you trace the big themes in AI in 2026, they're all fairly related. Part 1, at the beginning of the year, we have this mass recognition that based on updates to both the models and the harnesses, the agentic era was well and truly upon us, with all the consequent changes that that would bring. Now, one of those consequent changes is that the sheer number of tokens that we were using went way, way up. Putting a fine point on this was SemiAnalysis, who at the beginning of February wrote a piece called Claude Code is the Inflection Point. They wrote, We believe that Claude Code is the inflection point for AI agents and is a glimpse into how the future of AI will function. It's set to drive exceptional revenue growth for Anthropic in 2026, enabling the lab to dramatically outgrow OpenAI.
Now, that was the narrative that was taking hold, except that as more and more tokens were being consumed, it was hard not to notice that Anthropic's performance in particular was taking a hit. After the announcement of their mythos model, Strutecheries Ben Thompson wrote, How much of Anthropic's reluctance to make mythos widely available is due to security concerns, as opposed to the more prosaic reality that Anthropic simply doesn't have enough compute? Technology author Tay Kim wrote, It's obvious Anthropic vastly underestimated compute growth needs which is expanding much faster than expected. Dario is on the record multiple times describing OpenAI as YOLO, recklessly buying too much capacity, but now it looks like Sam Altman was right all along. Couple days later, he reposted his own tweet adding a quote from The Wall Street Journal, Anthropic, the maker of popular chatbot, Claude and viral coding app Claude Code has been plagued recently by frequent outages. The company has begun metering computing supply to users during peak hours, but the rollout has been marred by customers who have complained they are reaching the limit far too quickly. Whether it was the right decision or not, after investigating reports of Claude performance decreases over the last month and a half or so, Anthropic last week basically came out and said we investigated it and we did make a bunch of moves that ended up decreasing Claude's performance. Now, OpenAI for their part has absolutely seized on this emerging shift in the narrative. You can see references to the fact that OpenAI has compute and Anthropic has less of it woven throughout all of their communications over the last few weeks of model releases. When GPT Images 2 was released, OpenAI President Greg Brockman wrote, Really incredible what you're now able to create with a little bit of compute. After the release of GPT 5.5, Sam Altman wrote, Really excellent work by the inference team to serve this model so efficiently. To a significant degree, we have become an AI inference company now. Now, most people didn't even give that a second glance, but for those watching this compute-related narrative shift, he's basically saying that the only thing that matters to the end user is whether you can actually deliver the AI that they want. And yet, as token consumption goes up through more agentic usage, even if OpenAI is in a better position than Anthropic vis-a-vis compute, no one has as much compute as they want, and everywhere there are trade-offs being made. As early as the middle of last year, we saw companies start to shift their model away from flat fees and towards usage. Replit was an early mover on this, taking a bunch of licks when they made this shift earlier than most people around the summer and early fall of last year. But now it feels like we're on the verge of a cascade of exactly this type of change. On Monday, Microsoft's GitHub announced a shift to consumption-based fees. Their Copilot features had quietly become an extraordinary deal as coding agents took off. Their 39 a month top tier subscription had surprisingly generous limits, especially considering that the other major labs were charging $100 or $200 for their high usage tiers. Copilot's pricing model was also based on request rather than token usage, which was causing further distortions in this new agentic era. Now, this had obviously become unsustainable over the past six months. GitHub's usage metrics were off the charts and their stability was compromised by frequent outages caused by excess traffic. In a blog post explaining the change, Chief Product Officer Mario Rodriguez wrote, Copilot is not the same product it was a year ago. It has evolved from an in-editor assistant into an agentic platform capable of running long multi-step coding sessions, using the latest models and iterating across entire repositories. Agentic usage is becoming the default and it brings significantly higher compute and inference demands. Today, a quick chat question and a multi-hour autonomous coding session can cost the user the same amount. GitHub has absorbed much of the escalating inference cost behind that usage, but the current premium request model is no longer sustainable. Usage-based billing fixes that. It better aligns pricing with actual usage, helps us maintain long-term service reliability, and reduces the need to gate heavy users. Now, the new model will be broadly the same as cursor with users receiving a monthly allotment of credits with the option to buy more. GitHub is giving users time to adjust, delivering a preview of what their bill would look like under the new model during May before making the switch at the beginning of June. The switch came with a revised multiplier table which describes how many credits each model consumes. Some of the notable changes were Claude Opus 4.7 going from a 7.5x multiplier to 27x and Gemini 3.1 Pro and GPT 5.3 Codex, both going from a 1x multiplier to 6x. Basically, across the board, you're seeing around a 6x price hike for the frontier coding models. Developer Peter Dedenne remarked, These new copilot multipliers starting June 1st are absolutely ridiculous. I can only imagine this pricing is going to force users to lock in with a single foundation model vendor just to manage costs. Honestly, it would be hard to find a clearer indicator that the subsidy era is over than Microsoft literally revealing how deep their subsidies had been with this massive price hike. Anthropic has also been inching towards usage-based pricing for several weeks as they continue to face those stability issues. Now, although the stability issues they discussed last week were blamed on Claude Code bugs, it is very clear that Anthropic is straining under the weight of agentic usage. To be clear, what I'm saying is that they are straining under the weight of their own success. Over the past month, we've seen them actively force open call usage onto the API, run a so-called small test of removing Claude Code from the pro subscription, and, of course, most notably of all, withholding the release of their largest and most capable model. At the beginning of the month surrounding the open Claude changes, researcher Boris Cherny wrote, We've been working hard to meet the increase in demand for Claude, and our subscriptions weren't built for the usage patterns of these third-party tools. Capacity is a resource we manage thoughtfully, and we are prioritizing our customers using our products and API. We want to be intentional in managing our growth to continue to serve our customers sustainably long-term. This change is a step towards that. Now, over the weekend, a Reddit user reported that they were charged $200 in usage fees without notification just because they had the text Hermes.md in their Git commit history. They weren't actually using the Hermes agent, but they were kicked over to the API anyway. Anthropic later made it right, with Claude Codes Tariq writing, Ugh, sorry, this was a bug with the third-party harness detection and how we pull Git systems into the system prompt. We've reached out to the affected users and given them a refund and another month of credits. Regardless of the fact that they made it right, it demonstrates the length that they will increasingly need to go to stop token-hungry agents from draining their resources. Now, it's very clear that people are jittery right now about getting their Claude Code fix. On Monday, for example, a post went viral claiming that Anthropic had eliminated Opus from the $20 pro plan. The community notes later explained that this was an oversight in updating support documents, not a policy change, but not before thousands and thousands of people share the post, which based on everything else, they found quite believable. In another bizarre incident, a different Reddit user reported that their entire organization had been fired as an Anthropic client, all 110 of them. The user didn't discuss the reason for the ban and didn't seem to know.