AI is doing much more effort per given request than previously
More or less, and the result is it does generally accomplish the task now. At first if you ask an AI tool to implement a feature, it would spit what the average solution would be, completely ignorant of your existing codebase unless you told it.
Some models allowed 'Thinking' where it would talk over its response and iterate on how it should respond before responding. Better results from the same sized model, but more token usage per request
Then 'RAG' allowed the AI to read parts of your codebase and maybe even do a google search. Now it's got fresh code in its context specific to your problem and not buried in some weights from training data. You get really good results but that's a lot more tokens parsed. And way more tokens in the context window. If you run out of context window, the session crashes.
Now agentic coding allows your AI session (or Agent) to spin up sub-agents to answer specific questions for it. So if the AI wants to match house style, it will spin up a sub agent to read your source files and provide a summarized style guide to the main session. The sub agent can fill up its context window but only the summary is in the main agents context window. This is allows the AI to bypass the context window limit and consume more tokens.
More and more and more tokens. Anthropics Claude is the most expensive per-token by a long shot. $30 per million tokens (via cursor) and it will aggressively use as many tokens as possible to produce the best results in the field. The average developer doesn't care about cost because that's from the employer. They only care about quality and speed.
AI providers are currently taking a loss at their current token rates and client companies are finding those rates too high to be profitable. Unless some token efficiency unlock happens there will be a correction.
fwiw I suspect the solution will be to decrease the model size to lower token rates. Models that fit on a 64GB macbook can compete with the monstrosities that run in data-centers when you give them all the improvements I listed above.