The AI trade is losing one of its key signals

Stock Market numbers are displayed on the floor of the New York Stock Exchange during morning trading on July 01, 2026 in New York City. Photo by Michael M. Santiago/Getty Images

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At a time when markets are growing uneasy over whether the enormous sums being poured into artificial intelligence will ever pay off, the prices the sector commands for each unit of usage are drifting lower.

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The Silicon Data LLM Token Expenditure Index, which tracks what users pay for AI tokens, is down almost 20 per cent from a high in May after nearly doubling since its inception in December. The gauge is the cleanest read anyone has on the US$700 billion-plus capex boom that has done the sector’s heavy lifting.

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For stock investors, that could be flashing a warning that AI companies are losing pricing power with increasingly cost-sensitive customers, and that expectations for an eventual AI bonanza could prove misplaced.

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“There are increasing reports that users of AI solutions, priced in tokens, are having to restrain unlimited use due to high costs,” said veteran investor Louis Navellier. “The chatter that OpenAI is pushing back its IPO to next year is seen as a sign that, currently, profitability remains a problem.”

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Just to clarify, a softer index doesn’t mean AI is getting cheaper. The gauge blends prices and usage, meaning a dip can imply very different scenarios: either list prices are falling, or demand is shifting toward cheaper models. It could also point to a genuine softening in what buyers are prepared to shoulder.

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Each of these possibilities carries different implications. Silicon Data, which built the index, has warned people to stop reading it as a price tag. The firm calls it a proxy for marginal willingness to pay.

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Let’s start with a benign read: While token prices have collapsed more than 90 per cent since 2023, total spend has roughly doubled since last year. Cheaper tokens have expanded the market. This means than an index pause is simply digestion, while demand is real and capex is money well spent. The bull case for Nvidia Corp., memory makers and data-centre names rests here.

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Now for the interpretation that’s keeping people up at night: Bears warn that sustained weakness in the index could end the trade that saw nearly the entire AI cohort rally hard this cycle.

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It’s token spending that justifies the next capex order, and the bill is already looking stretched. Allianz Research said there’s nearly a 46 per cent growth gap between AI investment and sales. That’s worse than the 32 per cent divergence measured during the 2001 telecom bust.

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Fortunately for bulls, the downward trend has paused. It’s too early to call a bottom after one flat week, but it’s enough to keep the case for a rebound alive.

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“During the training phase, the cost of AI infrastructure and token generation is extraordinarily high, but in the current inference stage, the economics are significantly better,” said David Miller, senior portfolio manager at Catalyst Funds. “The net use of AI delivers a positive return on investment for companies, at least over the long term.”

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There’s also a more recent, demand-side reason why the bearish read may have legs. Washington has a newfound willingness to exert control over a pivotal industry. The U.S. government only this week removed foreign access restrictions on Anthropic PBC’s Fable 5 model, days after regulators requested OpenAI to stagger the roll-out of an upcoming release.