OpenAI is considering slashing prices in an effort to win customers from its rival Anthropic – potentially igniting a price war ahead of planned public listings this year by both companies.
The San Francisco-based artificial intelligence giant is contemplating big price cuts for its tokens, the unit of measurement AI companies use to charge for their products, according to a report in the Wall Street Journal. The potential price cuts come in response to similar reductions in pricing it’s expecting from Anthropic.
Businesses have acknowledge they’re thinking twice about using costly AI tools and OpenAI Chief Executive Sam Altman has said this year that high prices are a growing challenge.
“I think we’ll have a lot of ways we can help people get more value for less spend,” Altman said at a tech conference this year.
Big price cuts could eat into profit margins for the competing companies, adding more pressure to their businesses which already burn through billions of dollars. AI requires costly computing to process queries and perform tasks.
Anthropic’s business lately has been surging, fueling perceptions that it’s pulling ahead of OpenAI. Led by CEO Dario Amodei, Anthropic’s valuation reached a whopping $965 billion in its latest $65 billion financing round — surpassing OpenAI to become the most valuable AI startup.
Anthropic’s coding tool Claude Code has surged in popularity with software engineers, powering revenue to new heights.
Signs of Anthropic’s valuation run-up flashed last month on so-called secondary markets, where shares of still-private companies are traded. Buyers scooping up coveted Anthropic shares vaulted the AI giant’s valuation on some trading platforms to $1 trillion.
According to the report, some company leaders are now seeking to rein in AI spending after pouring huge sums into Anthropic’s tools – top brass are debating whether so-called tokenmaxxing where companies go all in on AI to boost productivity is worth it.
Such comments from many executives have triggered a debate within Silicon Valley about tokenmaxxing, or the practice of using as many tokens as possible to boost productivity, including in ways that don’t generate returns on investment.
Anthropic, OpenAI and Elon Musk’s AI outfit housed within SpaceX are all expected to go public this year. SpaceX recently filed paperwork to launch its IPO around June 12, boldly aiming for a $1.5 trillion valuation.