AI price war heats up as OpenAI's Luna undercuts rivals

A full-blown AI price war broke out this week as the major labs raced to the bottom on token costs. The LA Times reports OpenAI's new budget model Luna costs a fifth of its predecessor, xAI's Grok 4.5 undercuts Anthropic's comparable Opus model by more than half at $2 per 1M input tokens, and Meta is explicitly making price its core differentiator with promises of the lowest costs of all.

The mechanics are a reversal of last year's posture, when OpenAI mused publicly about charging thousands of dollars per month for top-tier agentic subscriptions. Now the pressure runs the other way: cheaper Chinese models like Z.ai's GLM-5.2 and DeepSeek's V4 Flash (at roughly $0.09/$0.18 per million tokens) are an order of magnitude below Western frontier pricing, forcing US incumbents to compete on cost for commodity workloads.

Competitively, this squeezes margins across the board and shifts the battleground from raw capability to efficiency-per-token. OpenAI has been optimizing GPT-5.6 Sol to consume fewer tokens; Anthropic's Sonnet 5 intro pricing ($2/$10 through August 31) is a direct response; and xAI is leaning on Cursor distribution to grab developer share.

Skeptics warn that headline per-token prices can be deceptive: r/LocalLLaMA and HN threads point out that verbose reasoning models inflate token counts, so a lower unit price doesn't always mean a lower bill. Watch whether the price war compresses lab economics enough to accelerate consolidation, and whether cheap Chinese models continue pulling US enterprise budgets.