Palo Alto Networks CEO Nikesh Arora warned that token costs need to drop as much as 90% to promote large-scale artificial intelligence adoption.
"I think 54% is a good start," Arora told CNBC's Seema Mody on "Squawk on the Street" Thursday, after OpenAI CEO Sam Altman told CNBC that the frontier lab's latest model is 54% more token-efficient for agentic coding. "I think we probably need another turn at it."
Arora said token efficiency needs to drop to as much as 20% over the next twelve months, and 90% by the following year.
Rising token costs have emerged as a major pain point for businesses and put a strain on AI budgets. The current pricing, he said, makes AI tools increasingly difficult for businesses to implement.
"We need to see the pricing for AI come down," Arora said.
Arora is among a growing group of executives pushing for a decline in token pricing. The worry is that high token costs create a major barrier to widespread adoption, preventing many enterprises from using the tools.
Last week, Palantir CEO Alex Karp blasted the token model used by Anthropic and OpenAI, and called open-weight models a potential solution.
"I'm not throwing shade at them, but something has gone completely wrong," he told CNBC's "Squawk Box." "The basic view among enterprises in this country is I'm going to chillax and waste my time with tokens."
The token problem is leading many businesses to implement cheaper open-weight tools, including Chinese models that are quickly closing the gap with American labs.
At the same time, AI spending is accelerating to new highs to power the massive infrastructure buildout. Tech giants are also looking for new ways to fund these AI investments, with SpaceX raising $25 billion last month in a bond sale. Amazon raised $25 billion in debt this week.
Arora said the market will start to come to terms with the spending, or businesses will adjust to the market. Budgets will also decline as the technology becomes more efficient.
"It's important to understand the demand continues to be infinite, and as long as you have an infinite demand curve that you're facing, I think all these things will rationalize over time," he said.
