OpenAI's GPT-5 Launch Sparks Potential AI Price War with Competitive Pricing

OpenAI priced GPT-5 so low, it may spark a price war | TechCrunch

OpenAI astounded the tech industry for the second time this week by launching its newest flagship model, GPT-5, just days after releasing two new freely available models under an open source license. OpenAI CEO Sam Altman went so far as to call GPT-5 "the best model in the world." That may be pride or hyperbole, as TechCrunch's Maxwell Zeff reports that GPT-5 only slightly outperforms other leading AI models from Anthropic, Google DeepMind, and xAI on some key benchmarks, and slightly lags on others. Still, it's a model that performs well for a wide variety of uses, particularly coding. And, as Altman pointed out, one area where it is undoubtedly competing well is price. "Very happy with the pricing we are able to deliver!" he tweeted. The top-level GPT-5 API costs $1.25 per 1 million tokens of input, and $10 per 1 million tokens for output (plus $0.125 per 1 million tokens for cached input). This pricing mirrors Google's Gemini 2.5 Pro basic subscription, which is also popular for coding-related tasks. Google, however, charges more if inputs/outputs cross a heavy threshold of 200,000 prompts, meaning its most consumption-heavy customers end up paying more. But OpenAI is really undercutting Anthropic's Claude Opus 4.1, which starts at $15 per 1 million input tokens and $75 per 1 million output tokens. (Anthropic does, however, offer big discounts for prompt caching and batch processing -- storing/reusing prompts and processing multiple requests together.) Anthropic's model has been extremely popular among programmers, both as a choice within popular coding assistant Cursor and powering its own such assistant, Claude Code. (Note that Cursor offered GPT-5 as an option minutes after it was announced.) Developers who have had early access to GPT-5 are touting the pricing. Simon Willison, one of the developers featured in OpenAI's launch video, writes in his review: "The pricing is aggressively competitive with other providers." (Emphasis his.) But GPT-5 is also priced competitively with GPT-4o. OthersideAI's co-founder and CEO, Matt Shumer (maker of HyperWrite), writes that GPT-5 "is cheaper than GPT-4o, which is fantastic. Intelligence per dollar continues to increase." Some on X called OpenAI's fees for the model "a pricing killer," while others on Hacker News are offering similar praise. Will competitors like Anthropic follow? Will Google -- who undercut OpenAI on pricing before -- get even more affordable? If so, we could be witnessing the start of a much awaited LLM price war. There's no doubt a price war would be welcome. The underlying economics of vibe-coding tool providers, for instance, is pretty shaky because of the high and unpredictable fees they have to pay model makers, as TechCrunch's Marina Temkin reports. And there are countless startups building on top of AI models as well. Silicon Valley has been hoping that the LLM price-to-performance ratio will eventually improve, along with inference costs. But it seemed like such an equalization could be years away as the tech industry invests hundreds of billions to build data centers and infrastructure to support growing AI demand. OpenAI itself has a $30 billion-per-year contract with Oracle for capacity, when it only recently hit annual recurring revenue of $10 billion. Meanwhile, Meta plans to spend up to $72 billion on AI infrastructure in 2025, and Alphabet has set aside $85 billion for capital expenditures in 2025, driven by AI needs. In the face of such enormous expenses, costs typically go one way: upwards. Given such investments, it may be too soon for startups looking at their rising model API bills to rejoice from OpenAI's lone move to lower pricing. Yet this week, OpenAI threw down the gauntlet to put pressure on prices not just once but twice. We'll see if others follow.

First came the AI talent war. Is a price war next? - The Economic Times

OpenAI's GPT-5 is priced the same as Google's Gemini 2.5 Pro and lower than GPT-4o. Interestingly, GPT-5 is priced far lower than Anthropic's Claude Opus 4.1. OpenAI has unveiled its powerful new model, GPT-5, just days after releasing two open-source models for public use. OpenAI CEO Sam Altman called it the "best model in the world," but whether it truly is, we're yet to see. However, one area where it is definitely making waves is pricing. As Sam Altman put it, "Very happy with the pricing we are able to deliver!" he posted on X. GPT-5's API is set at $1.25 per one million input tokens and $10 for one million output tokens, with a small extra cost of $0.125 for cached inputs. This matches the pricing of Google's Gemini 2.5 Pro, which is popular with developers, especially for coding. However, Google charges more once usage crosses 200,000 prompts, making it costlier for heavy users. In comparison, OpenAI is seriously undercutting Anthropic's Claude Opus 4.1, which starts at $15 per one million input tokens and a steep $75 for output. Claude does offer discounts for prompt caching and batch requests, but the base cost is way higher. Interestingly, GPT-5 is also priced lower than GPT-4o. Matt Shumer, CEO of OthersideAI, posted on X, "It is cheaper than GPT-4o, which is fantastic. Intelligence per dollar continues to increase." Whether rivals will now cut their prices in response remains to be seen. But for users, a price war would be a blessing. Still, the AI race is expensive. OpenAI has a $30 billion per year cloud deal with Oracle, triple its current annual recurring revenue. Meta is planning to spend up to $72 billion on AI in 2025, while Alphabet is setting aside $85 billion for AI-linked capital expenses next year. Given the size of investments, it's unlikely that huge undercuts would happen. So, while OpenAI's pricing may seem like a miracle and great news for developers, it may be a little early to have high hopes. At least until more companies follow suit.