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A closely followed measure of artificial intelligence token prices touched fresh lows this week, the latest sign of deflating prices in an increasingly competitive landscape.
The LLM Token Expenditure Index, a key gauge of daily prices from intelligence firm Silicon Data, fell to 97 cents on Monday. That marked the index's lowest reading since its creation late last year and has more than halved from the high recorded earlier this summer.
Silicon Data's index tracks the going rate on the market for a large-language model token.
A sharp slide in prices can mean AI model users will need to shell out less to run inquiries on popular chatbots like OpenAI's ChatGPT, Anthropic's Claude or Google's Gemini.
But it can be bad news for the companies behind the models. A lower index price can condition consumers to expect lower rates for access to these offerings, resulting in less pricing power for providers.
The recent drop is driven in part by the rise of open-source Chinese models like Moonshot's Kimi K3 that can fetch lower prices than alternatives from leading frontier lab, according to a Tuesday post from Charles-Henry Monchau, investing chief at Syz Group.
OpenAI announced price cuts two of its GPT-5.6 AI models in late July, while Monchau said other frontier labs have rolled out offerings with "dynamic pricing" capabilities that can allow access rates to rise and fall with demand. These developments put more downward pressure on the market rate for tokens.
"Foundation model labs are the most directly exposed," Monchau wrote. "Token deflation compresses the revenue line while compute commitments stay fixed. The strategic response is visible: the moat must shift away from raw model capability — where the open-weight gap is now measured in months — toward distribution, memory and context."
Decreasing costs across the industry for producing a token have also led to lower prices in the index, Monchau said.
The LLM Token Expenditure Index's slide could put new profit pressures on AI leaders like Anthropic and OpenAI as they contemplate when and if to enter the public market. Both companies confidentially filed for initial public offerings with regulators this summer.
Investors may also need to rejigger their outlooks around the potential return on invested capital in the AI buildout as token prices slide. Megacap technology companies including Nvidia and Microsoft have poured billions of dollars into plans to expand their capabilities to power AI.
The recent drop could signal that between frontier models and cheaper competitors, there may already be enough supply out there to "provide sufficient capabilities for most tasks," according to Steve Hou, Silicon Data's head of research.
Technology stocks led the broader market down on Tuesday. The technology-heavy Nasdaq Composite slid nearly 1%, while the broader S&P 500 ticked down 0.4%.
— CNBC's Nick Robertson contributed to this report.
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