There’s not enough AI. Jevons’ Paradox has been a hallmark of this era like Moore’s Law in chips. Will it fail early?

We continue to be supply constrained, a sign of momentum & rapid adoption. — Sundar Pichai, Alphabet Q2 2026.1

We will still not have enough capacity to meet all the demand we have in 2026, & I believe this dynamic will also be true in 2027 too. The demand we already have for 2028 is striking. — Andy Jassy, Amazon Q2 2026.2

Blackwell sales are off the charts, & cloud GPUs are sold out. — Jensen Huang, NVIDIA Q1 FY2027.3

So what happens if the price of AI doubles?

They’re already increasing. Anthropic launched Fable 5 on July 24 at $50 per million output tokens, doubling Opus 5 & setting a new frontier ceiling. Google’s Gemini flagship climbed from $1.50 to $12 across four generations.4

OpenAI, Anthropic, & Google flagship output token prices, March 2023 – July 2026, with the July 30 Sol-Luna divergence

Or at least most are increasing. OpenAI cut GPT-5.6 Luna prices by 80% five days after Fable 5’s launch, either a market-capture push or a fundamental cost breakthrough.5

The pitch so far from AI : Jevons’ paradox drives more consumption as prices fall. But prices are increasing.

AI labs are betting on segmentation. As long as the value & mid-market frontiers absorb the workloads priced out of premium, total GPU-hours consumed keeps growing. Segmentation sustains Jevons.

Frontier models cost 13× more for 20% more intelligence: premium, mid-market, & value tiers

The premium tier costs 13x the value tier for a fifth more intelligence. The mid-market frontier is the new arrival : GPT-5.6 Sol & Kimi K3, delivering 96% of frontier intelligence at 40% of the cost.67 The value frontier runs from GLM-5.2 down to DeepSeek V4 Flash, offering 84% of the intelligence at 1 to 5% of the premium cost.

As segmentation becomes the norm, routers become the strategic layer between buyer & model, the plumbing that lets an application shift a query to the right model. Routers will be internal to models, external in customers’ software, & in harnesses.

The major labs each need entries in all three tiers, or they lose the router auction on price. Startups win by owning a single point on the frontier that a big lab cannot economically match. DeepSeek V4 Flash at $0.03 is the existence proof.

All in furtherance of Jevons.

  1. Alphabet Q2 2026 earnings call, Sundar Pichai remarks, July 22, 2026. ↩︎

  2. Andy Jassy said Amazon will spend $220 billion this year and still won’t have enough capacity to meet demand, Fortune, July 30, 2026. ↩︎

  3. NVIDIA Q1 FY2027 earnings: revenue, EPS & outlook, May 20, 2026. ↩︎

  4. AI Model Inflation. Vendors are pivoting from share-taking subsidies to margin-taking pricing as capex hits records. ↩︎

  5. GPT-5.6 pricing effective July 30, 2026 : Sol at $5/$30, Luna at $0.20/$1.20 per million tokens. OpenAI GPT-5.6 price-performance frontier announcement; VentureBeat : OpenAI cuts GPT-5.6 Luna prices by 80%. ↩︎

  6. Artificial Analysis Intelligence Index v4.1 accessed 2026-08-04. ↩︎

  7. Mid-market average of GPT-5.6 Sol & Kimi K3 intelligence (58) versus premium average of Opus 5 & Fable 5 (60.5) = 96%. Cost ratio $1.05 / $2.75 = 38%. ↩︎