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Citadel Securities and Citrini Research are in agreement on one thing: The age of tokenomics is here, and spells bad news for the AI trade.
Both firms say the AI trade is being reshaped by tokenomics, the economic framework governing crypto tokens that are often used to pay for AI services. The main issue is the how expensive the use of these tokens will end up being for the hyperscalers driving red-hot demand.
In new research, Citadel Securities macro strategist Frank Flight laid out his worries, saying frontier models will be “expensive to run, constrained by physical bottlenecks, and vulnerable to unrealistic expectations of frictionless deployment cost.”
He added: “Adoption is becoming less about what frontier models can do in principle, and more about the price and scarcity of the inputs required to make AI operational at scale.”
Flight provided multiple examples of leading tech companies taking steps to address skyrocketing AI costs, including Amazon shutting down its employee-created token leaderboard, and Microsoft planning to phase out its Claude code licenses.
Other companies have experienced similar issues relating to tokenmaxxing costs. Marty Kausas, CEO of the tech firm Pylon, recently said that the era of unchecked, free-wielding token spending is coming to an end.
Citadel Securities adds that while some firms will continue using the most advanced AI models, it will be a smaller number that are well-equipped to shoulder the costs.
If token spending decreases and hyperscalers are forced to slow development efforts, that could challenge the AI trade. Citadel Securities and Citrini say investors could end up focusing more on firm margins and profitability, rather than simply riding momentum around AI.
Ultimately, this could mean fewer AI winners.
“We remain constructive on the terminal outcome of AI as a productivity-enhancing technology,” Flight said, “But … the route to that value is likely to be more selective and cost-conscious than markets once assumed, and that may be relevant for asset prices.”
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Samuel O’Brient is an experienced financial markets and business journalist who has written extensively on a wide range of topics involving economics, technology and public policy. At Business Insider, he covers important macro and micro economic stories, including takes from leading economists and hedge fund managers, breaking IPOs, corporate bankruptcies, meme stocks and short-selling. He also writes on other markets such as crypto, oil and real estate.He has interviewed many of the market’s most influential voices, ranging from top economists such as Mark Zandi and Richard Thalerto prominent investors including Danny Moses, Andrew Left, Anthony Scaramucci, Louis Navellier and Grant Cardone.Programs such as LiveNOW from Fox and Taking Stock have had Samuel on to discuss stock market developments. His reporting has been cited by The New York Times DealBook, Bloomberg Radio, Forbes, Entrepreneur and TheFutureParty.Samuel began at InvestorPlace, covering investing, retail trading and macro economic trends. Prior to joining Business Insider, he served as a technology markets reporter at TheStreet. He is a graduate of Sarah Lawrence College and Trinity College Dublin.Samuel’s work has appeared in publications such as TipRanks, EV and Observer. When he isn’t chasing down stories, he can often be found browsing book and record shops. To reach Samuel, email him at sobrient@insider.com or connect with him on LinkedIn. He is also on Signal as Samuel Clemens. Popular Articles: A Nobel economist has a warning for meme stock tradersThe business school dropout who kicked off the Beyond Meat rally wants you to know he’s not Roaring Kitty 2.0A top economist who thinks we’re on the brink of a recession says he’s eyeing these 3 warning signsTrump’s 401(k) executive order marks big changes for retirement savings — and possibly puts your money at riskWhy hedge fund icon Ray Dalio says you shouldn’t invest in real estate in this economyAI bullishness is soaring, but pros see a major opportunity brewing in an overlooked corner of the market
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