https://www.marketwatch.com/story/chatgpt-price-war-report-comes-as-data-shows-ai-usage-already-tailing-off-0ab2f174
ChatGPT price-war report comes as data shows AI usage already tailing off
As competition with Claude developer Anthropic heats up and customers balk at the cost of using its products, the ChatGPT company OpenAI is reportedly considering whether to slash the fees charged for its AI tokens.
no matter how powerful the technology of frontier models, “cost curves, capacity constraints and marginal returns” are what will determine the pace and scale of adoption.
Earlier today, in a report discussing how “AI bills are out of control”, JPMorgan tech guru and TMT salesman, Mark Schilsky wrote that "most of my high level investor discussions focus on one major topic: when will the party end? Put another way, tech investors have made so much money in Semis so quickly that they are looking for potential warning signs that the music is about to stop.
Here, the JPM trader highlighted perhaps the clearest indicator that the music was about to stop: "A slowdown in the growth of the annualized run-rate revenues of the major AI labs.
OpenAI is weighing significant cuts to what it charges for tokens. Hilariously, the move would be in anticipation of similar cuts the company expects at Anthropic, which is trying to double how much it charges for its latest model, Fable, which provides at best a very modest modest improvement in performance over Opus 4.8.
In short, we now have a classical deflationary race to the bottom, precisely the opposite of what the profit-strapped industry desperately needs to grow into its gargantuan balance sheets (and massive SPVs); Instead, the AI world is about to get hit with a collapse in both revenues and profit margins, while cash burn goes into full-on incinerator mode.
Warning that “business executives have begun to balk at the high prices for AI usage”, the WSJ writes that OpenAI CEO Altman said at a recent event that costs had become “a huge issue.”
“I think we’ll have a lot of ways we can help people get more value for less spend,” he said.
In other words, LLMs tried to push up token prices to and beyond their breaking point… and succeeded.
And now it’s time for the brutal drop: a drastic price war will erode the profit margins of both companies, which already lose billions of dollars because of the enormous cost for computing resources needed to run AI systems.