We've entered a new phase of the AI industry's development, with all the major players heavily cutting costs and boosting the capabilities of their entry-level models in order to compete with new models from China, like Moonshot's Kimi K3 and DeepSeek's V4 Flash. OpenAI did so most recently, cutting the price of its base frontier model, ChatGPT 5.6 Luna, by 80% per million tokens, and its mid-range 5.6 Terra by 20%. This comes just over a week after Google introduced its more-affordable Gemini 3.6 Flash and 3.5 Flash-Lite models. Anthropic hasn't cut prices, but replaced its most-affordable Opus 4.8 model with a more capable Claude 5.0 at the same price point.Intelligence is getting more affordable thanks to increased global competition, but this can come at the cost of margin for these major companies. This follows months of major AI businesses announcing cuts and limits on their use of the technology, even by major AI boosters like Elon Musk's xAI. Despite more workers using AI than ever before, productivity gains are reported to have been less than ideal.
AI companies are now racing to the bottom — crashing token prices and competitive models push companies to cut costs
For the rest of us, there's now significant AI intelligence to be found in more affordable models.
TL;DRAI
OpenAI cuts ChatGPT 5.6 Luna 80%; Google, Anthropic follow with cheaper entry-level models under Chinese rivals pressure. AI becomes commodity: vendor margins compress, but IT leaders deploy frontier models at significantly reduced token costs for production.
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