Question 1

What's the difference between inference cost and API cost?

Accepted Answer

API cost is what you pay the provider per token. Inference cost is the total cost to run the model, including compute, memory, and serving infrastructure. When using managed APIs, they're effectively the same.

Question 2

How do I reduce inference costs at scale?

Accepted Answer

Use smaller models for simpler tasks. Enable prompt caching (50% off repeated context). Use batch processing for non-real-time workloads. Consider self-hosting with open-source models at very high volumes.

Question 3

When does self-hosting become cheaper than API?

Accepted Answer

Generally at 1M+ requests/day, self-hosting open-source models (Llama, Mistral) becomes cost-competitive with managed APIs. Below that threshold, managed APIs save significant engineering overhead.

AI Inference Cost Calculator — Scale & Production Pricing

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