How much does it cost to run AI in production?

AI production costs vary 100× depending on model, volume, and architecture. Here's a realistic breakdown for common use cases.

Chatbot/customer support: GPT-4o costs ~$0.005 per conversation (500 input + 500 output tokens average). At 10,000 conversations/month = $50/month in API costs. Claude Sonnet is similar. Using a smaller model (GPT-4o-mini, Haiku) cuts this to ~$0.001 per conversation = $10/month.

RAG system (document Q&A): embedding costs ~$0.0001 per document chunk (one-time), retrieval is free (your infrastructure), LLM call is $0.005-$0.03 per query. At 50,000 queries/month: $250-$1,500/month in API costs plus $50-$200/month for vector database hosting.

Voice AI agent: $0.05-$0.15 per minute across STT + LLM + TTS. At 10,000 minutes/month = $500-$1,500/month.

Infrastructure costs beyond API calls: vector database hosting ($50-$500/month), application server ($20-$200/month), monitoring and logging ($50-$100/month), and development team time (largest cost by far).

Cost optimization strategies: cache frequent queries (reduce 20-40% of API calls), use cheaper models for simple tasks (classification, extraction) and expensive models only for complex reasoning, batch non-urgent requests, and implement streaming to reduce perceived latency without adding cost.

Self-hosting open-source models (Llama, Mistral) costs $500-$5,000/month for GPU infrastructure but eliminates per-query API costs. Break-even is typically at 100,000+ queries per month.