Companies are slashing AI spending, triggering a rapid collapse in token prices that is squeezing margins across the generative‑AI stack and forcing model providers into their first real pricing reckoning — with major implications for investors watching the sector’s profitability evaporate.

The most powerful and expensive AI models aren’t necessary for relatively mundane tasks. “It’s like driving a Lamborghini to go to the grocery store to pick up milk when that was designed to be raced around a track,” Cursor field chief technology officer Mike Saeks told The Wall Street Journal.

In response, companies are using lower-priced models, including some built in China. The potential cost savings — for example, saving 87% on the cost of building a web browser — are considerable.

Doing that from scratch costs more than $10,000 on OpenAI’s GPT-5.5; whereas a combination of Cursor’s Composer and Anthropic’s Opus 4.8 gets the job done for $1,339, according to Cursor research featured by the Journal.

Businesses that use such chatbots are getting big discount offers. Pylon, a customer support platform for high voltage towers, has received around $1.6 million in free tokens from one vendor, $65,000 from another and $10,000 from a third, co-founder Marty Kausas told the Journal.

Why Tokenomics Suddenly Matters

The fierce price competition is bringing to life a new field of study for decision-makers: tokenomics. This discipline helps businesses make the best use of limited AI budgets by tracking the rapidly changing price of tokens — chunks of data on which AI chatbot prices are set — as well as the cost of providing those tokens to users.

By applying tokenomics, AI users are inadvertently creating winners and losers across the generative AI value network.

The winners include Chinese suppliers of less expensive large language models — including DeepSeek, Qwen, GLM, Kimi and MiniMax — which by mid-2026 won 46% market share. Other beneficiaries are GPU and memory chip designers and fabricators such as Nvidia, TSMC, Micron, SanDisk and Western Digital.

Meanwhile, more expensive LLM providers — such as Cursor, Uber and Salesforce — are adjusting their prices downward.

The Forces Cutting Into AI Profit Potential

My work with Harvard Business School professor Michael Porter — whose books in industry analysis and competitive advantage transformed the........

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