Chinese AI models offering cheap open-weight versions have spooked US investors, but analysts say the resulting plunge in model costs could benefit the AI industry by supercharging global demand for AI systems.
Companies across the AI industry have slashed prices in recent weeks, with large-language model (LLM) inference prices per million tokens falling from above US$2 at the start of June to just US$1.2 this week, according to research firm Silicon Data’s LLM Token Expenditure Index, which tracks both frontier providers and open-weight platforms.
Chinese AI models drive price competition
Under pressure from cheaper Chinese models, Silicon Valley firms have cut the prices of closed models in an effort to grab market share. OpenAI, for instance, last week announced an 80 per cent discount on developer pricing for its lightweight GPT-5.6 Luna model, and a 20 per cent discount on the mid-tier GPT-5.6 Terra.
Those cuts contributed to a severe AI stock sell-off last month, amid investor concerns that US hyperscalers were overvalued.
‘Competition is up and prices are down,’ Silicon Data wrote on social media platform X on Wednesday. ‘This is good for consumer and enterprise users of AI (agents) and promotes much wider and faster AI adoption.’
The booth of Chinese AI model company MiniMax was seen at the World AI Conference in Shanghai on July 17, 2026 (Photo: AP).
Analysts say the intense competition will benefit the AI industry in the long run by promoting wider and faster adoption of AI systems.
