Definition
Prompt Caching: A technique that stores computed key-value tensors from a prompt's prefix so they can be reused on subsequent API calls, reducing cost and latency.
A practical guide to context budgets for AI agents. How to allocate tokens across system prompts, tools, retrieval, history, and a buffer in production.
Token prices fell 280x but enterprise AI spend rose 320%. Poor context architecture drives 60-70% of total AI costs. Here is where the money actually goes.
Prompt caching reduces AI agent API costs by up to 90% and latency by 31%. Here's how it works, where it breaks, and how to implement it right.