Sam Altman, CEO of OpenAI.
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The price of AI is falling fast. That might sound like bad news for the industry. Early evidence suggests the opposite is happening.OpenAI recently slashed the price of its GPT-5.6 Luna model by 80%. It also cut the price of its mid-range Terra model by 20%.Then something striking happened: Customers started using dramatically more AI.TD Cowen analysts studied usage data from OpenRouter, a service that lets developers access different AI models. They found that the effective price of using Luna fell roughly tenfold after the cuts. Meanwhile, consumption jumped about 14-fold. Terra's effective price fell roughly threefold while usage increased about fivefold.AI usage is commonly measured in "tokens," the small units of information that models process. Companies often pay to access AI models based on the number of tokens they consume.The remarkable part is that usage rose faster than prices fell. TD Cowen estimated that OpenAI's revenue from Luna increased about 34% compared with the seven-day period before the price cut. Terra revenue rose about 45%.The Luna situation is the most notable. When you slash a product's price by 80%, it's pretty unusual to actually generate more revenue.To me, this clearly shows an idea AI executives have repeated so often that it's become an industry cliché. I've barred myself from writing about this. Now, with such fascinating data points, I'm finally going to utter the phrase: Jevons Paradox.Yuck. I feel a bit dirty now.
