Context Engineering in 2026 — Louis-François Bouchard, Omar Solano & Samridhi Vaid, Towards AI
Experiments with an AI tutor reveal that not compacting context often outperforms summarization, leading to better recall, lower cost, and faster responses, primarily due to LLM API prompt caching. Compaction invalidates the cache, making it unexpectedly expensive. While cloud environments benefit from full history, local hardware limits necessitate compaction, highlighting the need to prioritize actual constraints over default compaction strategies.