OpenAI Slashes Prices for o3 Model by 80% to Compete in AI Market
OpenAI, the company behind popular AI models like ChatGPT, has slashed prices for its o3 model by 80%. This strategic move aims to compete with rivals like Google's Gemini 2.5 Pro and maintain market share. However, the company faces financial challenges as training and running models cost double or more than its revenues.
OpenAI's recent price cut brings its o3 model's cost down to $0.25 per million input tokens and $1.25 for output, a significant reduction from the previous $1.50 and $6 respectively. This move is a response to the competitive landscape, where similarly-powered models like Anthropic's Claude Opus 4 charge $15 and $75 per million input tokens and output.
OpenAI's aggressive pricing comes amidst a surge in ChatGPT's popularity, reaching approximately 800 million weekly active users worldwide in April 2025. However, OpenAI's dire financial outlook may lead to further strategies, such as adding AI functionality to platforms to create user reliance and potential future price hikes. Meanwhile, competitors like DeepMind's DeepSeek models offer cheaper per-token services, ranging from $0.07 to $0.55, potentially limiting OpenAI's market growth despite the price cut.
OpenAI's price cut on the o3 model is a bold move to compete in the AI market. However, the company must quadruple its user base to maintain its financial position after the 80% reduction. The next couple of years will be crucial in determining OpenAI's and its competitors' strategies in the AI space.
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