AI Price War: OpenAI Cuts Prices to Compete with Chinese Models

The global AI competition has entered a new phase. OpenAI cut prices for its frontier model ChatGPT 5.6 Luna by 80% and its mid-tier model 5.6 Terra by 20%, responding to competition from Chinese models like Kimi K3 and DeepSeek V4. Google had already launched cheaper Gemini 3.6 Flash and 3.5 Flash-Lite, while Anthropic replaced its low-cost Opus 4.8 with the stronger Claude 5.0 at the same price.

After the cuts, Luna costs only $0.20 per million input tokens, now in DeepSeek V4's price range. Terra dropped to $2, below Kimi K3's $3. But OpenAI's flagship 5.6 Sol stays the same, and its Fast mode is more expensive.

Lower prices may boost usage, but OpenAI faces huge costs: it has committed $600 billion for compute by 2030, its subscription business is losing money, and it missed revenue targets. The industry hopes for the Jevons paradox and efficiency gains from next-gen chips like Nvidia's Vera Rubin, but profitability remains uncertain.