Microsoft has been reportedly losing money on GitHub Copilot

Devesh Beri

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There have been challenges that tech companies face in making a profit from generative artificial intelligence (AI) tools, which can generate business memos, computer code, and other content, The Wall Street Journal reported.

Generative AI tools are expensive to operate because they require powerful servers with expensive chips that consume a lot of power. Companies like Microsoft, Google, and Adobe are experimenting with various pricing models for AI products. This includes charging based on consumption, adding additional charges for AI-infused features, and using credits to limit usage. Microsoft is charging $30 per user per month for its various Microsoft 365 Copilots, but started out charging only $10/mo for its first Copilot, for GitHub.

Microsoft has reportedly lost money on one of its generative AI products, GitHub Copilot, due to high operating costs. According to the WSJ article:

Individuals pay $10 a month for the AI assistant. In the first few months of this year, the company was losing on average more than $20 a month per user, according to a person familiar with the figures, who said some users were costing the company as much as $80 a month.

Some AI services use the most powerful AI models available, which require massive computing power and intelligence. Microsoft “has been exploring cheaper AI tools for use in Bing, according to the article.

Alternatives routes

  • Some companies are exploring the use of less powerful and cheaper AI tools for certain tasks to reduce costs. Zoom, for example, has developed a smaller, cheaper software for its AI assistant.
  • Adobe uses a system of credits to control the usage of its AI image generator, slowing down the service when customers exceed their allotted monthly credits to avoid overuse and cost overruns.

Companies anticipate that generative AI will become cheaper over time, driven by innovations and improvements in processing efficiency, similar to the evolution of cloud storage and 3-D animation technologies.

Despite the current challenges and uncertainties surrounding the profitability of AI products, investors remain enthusiastic about AI technology, leading to rising valuations for companies in the AI space.