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International Business Machines Corp. Chairman and CEO Arvind Krishna questioned enterprise spending on frontier artificial intelligence models, stating that open-weight alternatives now offer nearly equal performance at a fraction of the price. <\/p>\n
CEO Asks ‘Why Pay 10x More?’ <\/p>\n
Speaking during the company’s third-quarter 2026 earnings call, Krishna outlined the shrinking performance gap between the industry’s most advanced frontier large language models and alternative open models. Krishna stated that open-weight models now run at 10% to 25% of the token cost of frontier models. <\/p>\n
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“Our computation is that for an average large enterprise, you can get going with maybe two or three racks, which is not a huge amount of infrastructure, but it gives you the ability to run those open-weight models. Currently, anywhere from 25% to 10% of the token cost of the frontier models. That is very attractive given that they’re now 90% as effective,” he said. <\/p>\n
Krishna noted that in late 2024, open models scored significantly lower on benchmarks than frontier models, but the gap has narrowed to where alternate models are now about 90% as effective. <\/p>\n
“It’s a simple question for any enterprise,” Krishna stated. “Would you like something that’s 10% of the cost if it’s 90% as good as the best, or do you want to pay that 10 times higher cost?” <\/p>\n
Sovereign AI and Data Control <\/p>\n
Krishna said the economics of open-weight models are converging with another major enterprise trend: sovereign AI. Companies increasingly want to keep sensitive data, logs and model activity under their own control, fueling demand for on-premises and private AI infrastructure. <\/p>\n
For most daily enterprise tasks, such as summarizing emails, answering customer calls, or examining contracts, Krishna stated these cheaper alternative models are sufficient. <\/p>\n
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