AI engineers claim new algorithm reduces AI power consumption by 95%

Does https://en.wikipedia.org/wiki/Jevons_paradox apply in this case ?

Of course. Jevons paradox always applies.

Not necessarily a bad thing: this might give the AI charlatans enough time to actually make something useful.

That's interesting.

Obviously, energy cost creates a barrier to entry, so reduction of cost reduces the barrier to entry... which adds more players... which increases demand.