OpenAI today announced its newest flagship model, GPT-5. This thrilling news followed just days after their release of two new models, which are open and freely accessible under an open-source license. Since the launch, the announcement has sent shockwaves through the AI community. This excitement was heightened when Cursor further announced just minutes later that they would be providing GPT-5 as an option to users. Especially with this rapid rollout, OpenAI has a clear edge, and many are already anticipating a price war as other players enter the field.
GPT-5’s pricing paradigm gives insight into OpenAI’s bold move to capture the hearts and minds of users. The highest-quality API for GPT-5 is $1.25 per million tokens input and $10 per million tokens output. There is an additional, cached input charge of $0.125/m tokens. In fact, this pricing is actually quite competitive next to GPT-4o and even some of the biggest names in tech have given praise to its affordability.
OpenAI CEO Sam Altman has sung the model’s praises, calling it “the best model in the world.” His delight at the pricing comes through, as he wrote,
“Very happy with the pricing we are able to deliver!” – Sam Altman.
OthersideAI’s co-founder and CEO, Matt Shumer, highlighted the significance of GPT-5’s pricing, noting that it is “cheaper than GPT-4o, which is fantastic. Intelligence per dollar continues to increase.” Responses like these prove just how quickly and favorably the sector is reacting to the new model.
Simon Willison, a noted tech influencer and former CTO of the UK Government, called GPT-5’s broad availability “aggressively competitive” with all other providers. This sentiment suggests that OpenAI’s pricing strategy may compel other companies to reassess their own pricing models in light of the new competition.
Timing of GPT-5’s launch is especially significant. This follows OpenAI’s recently announced $30 billion-per-year contract with Oracle to beef up their data center operations. This milestone played a big role in their path to crossing $10 billion annual recurring revenue! This financial support enables OpenAI to take a surprising and disruptive move on pricing that flips the SaaS market on its head.
Silicon Valley is understandably excited about recent progress in the large language model (LLM) space. They are still excited to see improvements in the price-to-performance ratio and reductions in inference costs. OpenAI has taken the world by storm with two huge announcements in one week! Their recent actions speak louder than words in conveying a genuine commitment to surface saving, price cutting action across the board.
For the time being, the industry is now forced to consider what OpenAI’s disruptive pricing gambit means. Already companies such as Cursor are moving quickly to integrate GPT-5 into their products. This change will radically alter the competitive landscape in the AI ecosystem.