GoKawiilWe'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.
Intensifying competition
The story of Chinese and American AI development efforts has been somewhat emblematic of the countries' historic strengths. While American firms burn through enormous amounts of money to push frontier technologies, Chinese developers have leveraged their industrial base to develop models that are cheaper, leaner, and almost as good at the top end.
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DeepSeek gave Western AI developers a shock in 2025, and Kimi K3 did much the same in 2026. Alone, these events would cause concern for companies like OpenAI, Google, and Anthropic. Still, after months of companies that use AI heavily complaining about skyrocketing token costs, the news of an almost-as-good model at a much lower price really made a splash.
Now, the big AI developers can't just compete by throwing more parameters and training data at the problem. Now they're having to really compete on price, and to do it, OpenAI has massively reduced the price of its models. Not its most powerful and capable — the faster version of that is actually becoming more expensive — but models in its frontier range are now the cheapest they've ever been, and the timeline for this transition of intelligence and pricing is wild.
OpenAI launched ChatGPT 5.4 in March with powerful new agentic capabilities for $2.50 per million input tokens and $15 per million output tokens. GPT 5.6 Luna is now just $0.20 and $1.20, respectively. That's a less-than-four-month window for a frontier model to remain cutting-edge and priced accordingly.
GPT-5.4 full at xhigh scored 51, exactly where Luna max sits today. GPT-5.4 costs $2.50/$15; Luna now costs $0.20/$1.20. In other words, roughly four months later, OpenAI is selling March’s full flagship intelligence at about one-thirteenth the token price.July 30, 2026
These latest cuts bring Luna into the realm of DeepSeek V4, with its pro model costing $0.435 per million input tokens and $0.87 per million output tokens.
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