{"slug": "the-cost-of-compute-is-far-beyond-the-costs-of-the-employee-nvidia-executive-now", "title": "‘The cost of compute is far beyond the costs of the employee’: Nvidia executive says right now AI is more expensive than paying human workers", "summary": "Nvidia vice president Bryan Catanzaro said the cost of AI compute far exceeds employee costs, challenging the notion that AI is cheaper than human labor. An MIT study found AI automation is economically viable in only 23% of vision-based roles, while tech firms have announced $740 billion in AI capital expenditures this year, a 69% increase from 2025, amid over 118,000 tech layoffs in 2026.", "body_md": "[Recent tech layoffs](https://fortune.com/2026/04/23/meta-microsoft-layoffs-job-cuts-not-filling-open-roles-voluntary-buyouts/) would initially appear to indicate the great labor shift from human workers to AI may already be happening.\n\n[Meta](https://fortune.com/company/facebook/) announced in a memo earlier this year it plans to lay off 10% of its workforce, about 8,000 employees, as well as scrap plans to hire for 6,000 open positions. It’s part of an effort to “run the company more efficiently and to allow us to offset the other investments we’re making,” according to the memo. [Microsoft](https://fortune.com/company/microsoft/) has offered thousands of its own employees a voluntary buyout, the largest the company has ever offered.\n\nOther tech headers, however, suggest that right now, AI isn’t saving companies money on labor; it’s actually costing them more than the humans they currently employ.\n\n“For my team, the cost of compute is far beyond the costs of the employees,” Bryan Catanzaro, vice president of applied deep learning at [Nvidia](https://fortune.com/company/nvidia/), [told Axios](https://www.axios.com/2026/04/26/ai-cost-human-workers) in April.\n\nAn MIT [study](https://www.csail.mit.edu/news/rethinking-ais-impact-mit-csail-study-reveals-economic-limits-job-automation) from 2024 backs up these executives’ experiences. Analyzing the technical requirements of AI models needed to perform jobs at a human level, researchers found that AI automation would be economically viable in only 23% of roles where vision is a primary part of the work. In the remaining 77% of the time, it was cheaper for humans to continue their work.\n\nIn other instances, AI has proved to be fallible, with one engineer saying an AI agent [destroyed his database](https://fortune.com/2026/03/18/ai-coding-risks-amazon-agents-enterprise/) and network as a result of what he called “overuse.”\n\n## Why are tech firms pouring money into AI despite financial pressures?\n\nDespite [no clear evidence](https://fortune.com/2026/02/17/ai-productivity-paradox-ceo-study-robert-solow-information-technology-age/) of AI improving productivity and, according to the Yale Budget Lab, [no widespread data](https://budgetlab.yale.edu/research/tracking-impact-ai-labor-market) to support the idea of AI displacing jobs, Big Tech firms have continued to pour money into AI, [announcing $740 billion in capital expenditures](https://www.morganstanley.com/insights/articles/ai-capex-740-billion-banking-opportunity) this year so far, according to [Morgan Stanley](https://fortune.com/company/morgan-stanley/), a 69% increase from 2025. The magnitude of spending has caused some companies to rethink their budget altogether.\n\n“I’m back to the drawing board because the budget I thought I would need is blown away already,” Uber chief technology officer Praveen Neppalli Naga [told The Information](https://www.theinformation.com/newsletters/applied-ai/uber-cto-shows-claude-code-can-blow-ai-budgets) earlier this month, referring to the rideshare giant’s pivot to AI coding tools, such as Anthropic’s Claude Code. Naga said the company burnt through its entire 2026 AI coding tools budget by April after it incentivized adoption through leaderboards for employees adopting the tools.\n\nMicrosoft is also cancelling most of its direct Claude Code licenses, [ The Verge reported](https://www.theverge.com/tech/930447/microsoft-claude-code-discontinued-notepad) last month, instead pivoting to GitHub Copilot CLI. The technology essentially became\n\n[too popular too fast](https://fortune.com/2026/05/22/microsoft-ai-cost-problem-tokens-agents/)as the tech firm pushed employees to integrate AI into their workflow.\n\nThis increase in spending has coincided with more layoffs in the tech sector. According to data from Layoffs.fyi, there have been [more than 118,000 layoffs](https://layoffs.fyi/) in tech in 2026 so far across nearly 100 companies. The rate of these workforce reductions is already far outpacing that of last year, which saw about 120,000 layoffs in total.\n\nThe continued AI spending and layoffs, even as human labor remains cheaper, expose a meaningful discrepancy in the economics of AI, said Keith Lee, an AI and finance professor at the Swiss Institute of Artificial Intelligence’s Gordon School of Business.\n\n“What we’re seeing is a short-term mismatch,” Lee told *Fortune*.\n\n## When will there be an AI-labor cost balance?\n\nAccording to Lee, the cost of using AI has remained less efficient than human labor owing to hardware and energy raising operating costs for providers. At its current pace, AI expenditures [may reach $5.2 trillion by 2030](https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/the-cost-of-compute-a-7-trillion-dollar-race-to-scale-data-centers), with $1.6 trillion from data center spending and $3.3 trillion from IT equipment, according to [McKinsey](https://fortune.com/company/mckinsey/) data. Spending could surge to $7.9 trillion by 2030 at an accelerated pace. Meanwhile, fees for AI software have increased [by 20% to 37%](https://www.tropicapp.io/blog/ai-tax) over the past year, spending management firm Tropic noted in December 2025.\n\nAI companies may also be losing money as a result of their flat subscription model, Lee noted, with fixed subscription fees failing to cover operating costs for heavy AI users.\n\n“As a result, some firms are beginning to reevaluate AI not as a clear cost-saving substitute for labor, but as a complementary tool—at least until the cost structure stabilizes,” he said.\n\nWhile AI may cost more than human labor today, there will be warning signs of a tipping point toward AI’s economic viability. For one, Lee indicated, the cost of using AI will become significantly lower, with performing inference—how AI analyzes data—for a large language model with 1 trillion parameters [plummeting by more than 90%](https://www.gartner.com/en/newsroom/press-releases/2026-03-25-gartner-predicts-that-by-2030-performing-inference-on-an-llm-with-1-trillion-parameters-will-cost-genai-providers-over-90-percent-less-than-in-2025) over the next four years, according to a report last month from analyst firm [Gartner](https://fortune.com/company/gartner/). AI infrastructure will likely improve, and model designs and hardware supply will follow. AI companies will also likely change how they price their tools, switching from a flat subscription to usage-based pricing, Lee predicted.\n\nBut the future of AI’s economic viability will also depend on whether the technology proves its worth. It will have to prove itself reliable, with fewer hallucinations and a reduced need for human oversight, effectively integrating into a company’s infrastructure, according to Lee. Federal Reserve data shows [about 18% of companies](https://www.federalreserve.gov/econres/notes/feds-notes/monitoring-ai-adoption-in-the-u-s-economy-20260403.html) had adopted AI tools as of the end of 2025, a 68% growth in the adoption rate since September 2025.\n\n“It’s not just about AI becoming cheaper than humans,” Lee said. “It’s about becoming both cheaper and more predictable at scale.”\n\n*A version of this story was published on Fortune.com on April 28, 2026.*\n\n### More on the cost of AI:\n\n- ‘Big Tech is desperate’:\n[Amazon](https://fortune.com/company/amazon-com/)engineers are[calling out the tech giant](https://fortune.com/2026/06/05/amazon-engineer-seattle-data-center-hearing-speak-out-ai-layoffs/)for its $200 billion in data center spending after slashing 30,000 workers - AI productivity gains are real but\n[so is bad management](https://fortune.com/2026/06/05/ai-productivity-paradox-bad-leadership-tokenmaxxing-big-tech-boston-consulting-group/): ‘Leaders are really struggling to articulate what the vision and strategy is’ - By every measure, U.S. companies are winning on AI adoption—but a series of high-profile snafus shows they’re\n[getting pummeled by costs](https://fortune.com/2026/06/03/us-companies-ai-adoption-high-costs/)\n\n**Subscribe to Fortune Gulf Brief**. Every Tuesday, this new newsletter delivers clear-eyed, authoritative intelligence on the deals, decisions, policies, and power shifts shaping one of the world’s most consequential regions, written for the people who need to act on it.\n\n[Sign up here.](https://fortune.com/newsletters/fortune-gulf-brief?&itm_source=fortune&itm_medium=nl_article_tout&itm_campaign=gulf_brief)", "url": "https://wpnews.pro/news/the-cost-of-compute-is-far-beyond-the-costs-of-the-employee-nvidia-executive-now", "canonical_source": "https://fortune.com/article/why-is-the-cost-of-ai-higher-than-human-workers-nvidia-executive/", "published_at": "2026-06-14 14:49:24+00:00", "updated_at": "2026-06-14 15:41:46.123969+00:00", "lang": "en", "topics": ["artificial-intelligence", "ai-policy", "ai-ethics", "ai-research", "ai-infrastructure"], "entities": ["Nvidia", "Bryan Catanzaro", "Meta", "Microsoft", "MIT", "Morgan Stanley", "Uber", "Anthropic"], "alternates": {"html": "https://wpnews.pro/news/the-cost-of-compute-is-far-beyond-the-costs-of-the-employee-nvidia-executive-now", "markdown": "https://wpnews.pro/news/the-cost-of-compute-is-far-beyond-the-costs-of-the-employee-nvidia-executive-now.md", "text": "https://wpnews.pro/news/the-cost-of-compute-is-far-beyond-the-costs-of-the-employee-nvidia-executive-now.txt", "jsonld": "https://wpnews.pro/news/the-cost-of-compute-is-far-beyond-the-costs-of-the-employee-nvidia-executive-now.jsonld"}}