Self-Hosting LLM Inference Only Pays Off Above 2M Daily Tokens
rseroter · x · 2026-08-07
This article provides a thorough economic analysis of when teams should transition from managed LLM APIs to self-hosted inference. The core takeaway: self-hosting only becomes cost-effective when processing over 2 million tokens per day, or when strict data sovereignty requirements apply.
- API Dominance: Below 1 million daily tokens, APIs are not only the easiest option but also the cheapest, entirely eliminating GPU maintenance.
- Hidden Costs: Beyond hardware, the salary of an MLOps engineer (around $160k/year) is a massive hidden cost of self-hosting that teams often overlook.
- The Hybrid Sweet Spot: Most teams benefit from a hybrid routing architecture—keeping sensitive, high-volume workloads local while sending complex reasoning to frontier models over the wire, reducing costs by 40-70% compared to all-API setups.
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