AI companies are now racing to the bottom — crashing token prices and competitive models push companies to cut costs
All major AI developers are cutting prices to compete with impressive new releases from China. But as they shave margins to remain competitive, the profits they'll need to fulfil investment confidence may end up further out of reach.
The AI industry is undergoing a dramatic shift, with major companies cutting costs to compete with new models from China. OpenAI, Google, and Anthropic are all reducing prices for their entry-level models to match more affordable offerings from Chinese firms like Moonshot's Kimi K3 and DeepSeek's V4 Flash. OpenAI's latest model, ChatGPT 5.6 Luna, now costs just 0.20 and 1.20 per million input and output tokens, respectively, a 99.6% and 93.3% reduction from its March 2026 price.
This price war threatens the profitability of these AI giants, as they struggle to cover billions in compute spend committed by 2030. While some investors are betting on the Jevons Paradox to drive higher adoption and revenue, the financial reality may not support such lofty expectations.
Written by urgent.news from Tom's Hardware's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.