Appian CEO says time of subsidized AI will end soon

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Appian (APPN [https://seekingalpha.com/symbol/APPN]) CEO and co-founder Matt Calkins said the days of artificial intelligence usage being subsidized by providers are coming to an end, and soon.

"We are in the era of subsidies for AI," Calkins said during an interview with Seeking Alpha. "They are currently being offered to consumers at much less than it cost to create them. That will eventually change, and people will need to be more judicious. When OpenAI (OPENAI [https://seekingalpha.com/symbol/OPENAI]) and Anthropic (ANTHRO [https://seekingalpha.com/symbol/ANTHRO]) go public, these prices will probably increase substantially."

Both OpenAI and Anthropic are expected to go public at some point this year. SpaceX (SPCX [https://seekingalpha.com/symbol/SPCX]), which recently merged with xAI, the developer of Grok, filed for its IPO on May 20. As all these frontier AI labs go public, the prices for tokens are expected to rise. This will really start to separate the winners from the losers in the AI race.

"I think the pressure is coming now," Calkins said. "It's going to be one of the stories of the year. The subsidies have to stop. It can't continue. Some things are great because they are cheap. Metro trains are one example. Today, AI is the metro train of tech."

Appian, along with a wide array of other software firms, has also been under pressure as fears of AI disruption have prompted investor selloffs. Despite revenue increasing by more than 20% for three consecutive quarters, its share price has declined by more than 30% year to date.

Appian provides software that automates and orchestrates complex business processes. This helps organizations run better processes that reduce costs, improve customer experiences, and gain a strategic edge. Appian provides a deterministic layer that enterprises need to deploy AI at scale. It also helps companies determine when and when not to use AI.

"Any given job does not have to be done by AI, and many jobs should not be done by AI or an AI agent," Calkins said. "We should be open-minded about which jobs can be filled by AI."

Despite the noise of AI displacing the efforts of enterprise software firms, Appian has used it to substantially increase its revenue. Forty percent of its entire customer base is paying Appian for AI, and their usage is increasing exponentially. This includes seven of the 10 largest pharmaceutical companies in the world, seven out of the 10 largest insurers, and eight of the 10 biggest non-Chinese banks.

"Our place is not to use huge amounts of compute to make AI," Clakins said. "We just use their products. However, our clients use less than others because we help them find cheaper substitutes. We are the ROI choice."

"AI is not stand-alone technology," Calkins said during Appian's Investor Day [https://seekingalpha.com/article/4905416-appian-corporation-appn-analyst-investor-day-transcript] earlier this month. "It's probabilistic. It's not reliable enough. There's going to have to be an AI stack. The AI stack is going to have to include a deterministic framework that makes AI reliable."

"I think our ability to add value to a customer has definitely doubled and probably more," he added. "And that's before you mention legacy modernization. I think legacy modernization is just off the charts in terms of the potential."

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