AI inference is obviously profitable

A back-of-the-envelope cost analysis argues that AI inference is genuinely profitable, contrary to popular claims that it requires VC subsidies to survive. Using A100 GPU power consumption, amortized hardware costs, and industrial electricity prices, the author estimates inference costs at roughly $1 per million output tokens — well below the $4.50+ that providers like OpenAI charge, implying 70–80% gross margins. DeepSeek's open-weights models and competitive API pricing further corroborate these margins. The key distinction: inference itself is profitable, but AI labs like OpenAI and Anthropic use those margins to subsidize expensive model training. Pure inference providers without training costs could remain profitable even if the current AI investment bubble deflates.