OpenAI’s o3 Price Shock: How an 80% Can Disrupt the AI Market

On June 10, 2025, OpenAI made a bold move. It slashed the price of its o3 API by a stunning 80%. This massive cut now makes one of the most powerful AI models far more affordable for developers and businesses around the world.

OpenAI’s CEO, Sam Altman, announced the change. He also hinted at something new: a premium version called o3-pro. This version will offer even better performance and seems aimed at high-end users, like large companies and tech professionals who need the best results possible.

This price cut isn’t just about saving money. It could change the entire AI market.

By making o3 much cheaper, OpenAI opens the door for more people to build, test, and deploy advanced AI tools. Startups, developers, and even small businesses can now access what used to be top-tier tech at a much lower cost.

The 80% Price Drop: From Premium to Accessible

The biggest news was the massive 80% price cut for using o3.

Before this, it cost $10 for every 1 million input tokens and $40 for every 1 million output tokens. After the change, those prices dropped to just $2 and $8, respectively. This makes o3 much more affordable, even cheaper than similar models from Google and Anthropic in some cases.

Here’s a quick comparison of the old and new prices:

Table: OpenAI o3 API Pricing Comparison (Old vs. New)

This price cut means more developers can now build advanced apps without blowing their budgets. It opens up opportunities for smaller teams and startups that were priced out before.

o3 Price Slash: Why OpenAI Is Betting on a Low-Price, High-Stakes Model

OpenAI didn’t cut prices just to be generous. This move is part of a smart, long-term plan. It’s designed to beat the competition, grow its user base, and build the strongest AI ecosystem in the market.

Battling the Competition: Google, Anthropic, and the Rest

The AI market is heating up. Google has its Gemini models, Anthropic offers Claude, and newer companies like DeepSeek are entering the scene.

Some of these models were already cheaper or offered strong performance for the price. For example, Gemini 2.5 Pro cost as little as $1.25 per million input tokens and $10 per million output tokens—less than OpenAI’s old prices.

OpenAI’s response? Cut o3 prices down to $2 for input and $8 for output. That puts it back in the lead, and in many cases, makes it cheaper than its rivals.

But this isn’t just about winning a pricing war. It’s about making it harder for smaller competitors to keep up. OpenAI has deep pockets and a $10 billion yearly revenue stream. With this price drop, it’s putting pressure on other companies that may not have the same financial strength to offer high-quality AI at such low prices.

By forcing the market into what some call “involution”—a kind of internal arms race—OpenAI is betting that many smaller players won’t be able to keep pace. This could eventually shrink the field and push more developers toward OpenAI’s platform.

Sparking Innovation: Opening the Doors for More Builders

Another big reason for the price cut is to fuel innovation. OpenAI wants more developers, startups, and researchers to build with o3. Lower prices mean more people can afford to try bold new ideas.

Sam Altman, OpenAI’s CEO, said he’s excited to see what developers will create now that the barrier to entry is lower. Others in the tech world, like Box CEO Aaron Levie, have long shared a similar sentiment. Cheaper access makes once-expensive use cases—like AI for writing, customer service, and analytics—possible for more people.

This broader use helps OpenAI too. As more apps and tools are built on o3, OpenAI gets valuable feedback and usage data. That data helps improve future models. It’s a win-win: more users get access, and OpenAI gets smarter.

This is part of a long-term strategy to build what’s called a data moat—a protective advantage made possible by having access to lots of real-world usage. The more people build on OpenAI, the harder it is for rivals to catch up.

Playing the Long Game: Market Power and Cloud Control

Lowering o3 prices also fits into OpenAI’s bigger strategy for growth and cloud independence.

The company recently partnered with Google Cloud to power its AI systems, moving away from relying only on Microsoft Azure. This switch came after delays in Microsoft’s data center expansion.

OpenAI still works with Microsoft, especially for reselling on Azure, but it no longer depends on Azure alone. By going multi-cloud, OpenAI gets more flexibility and better negotiating power.

Google Cloud and Azure now have to compete for OpenAI’s business—which could mean better deals and faster access to compute.

And compute matters—a lot. Training and running large AI models takes massive amounts of computing power. By some estimates, OpenAI’s compute needs could cost over $320 billion by 2030. Having strong partnerships with more than one cloud provider helps ensure OpenAI can meet those demands without delays or limitations.

At the end of the day, this price cut is about more than just cost. It’s about winning long-term. OpenAI wants to dominate the market, collect the best data, stay ahead on infrastructure, and make it hard for anyone else to catch up.

Industry Fallout: The Competitive and Developer Ripple Effects

OpenAI’s dramatic price drop for the o3 model is already shaking up the AI industry. By making powerful AI more affordable, the company is forcing change across multiple areas—from developers and startups to cloud computing giants and rival AI providers.

A New Dawn for Developers and AI-Powered Startups

For developers and startup founders, this price cut is a big deal. It opens the door to build and test AI applications that were once too expensive to run.

With o3 now costing just a fraction of what it used to, small teams can create apps that use advanced reasoning—like tools for writing, customer service, coding, or analytics—without burning through their budgets.

This change levels the playing field. Startups can now move faster and compete with bigger companies that have more money and resources. The result? More creativity, faster product launches, and an explosion of new ideas across the AI space.

But there’s a flip side. Relying too much on OpenAI’s models comes with risk. If OpenAI changes its pricing again, tweaks how o3 performs, or limits access in the future, startups could be left scrambling.

So while lower costs boost innovation, they also create a kind of lock-in. Smart startups will need to plan for this by exploring backups or using multiple AI providers.

Pressure on Google, Anthropic, and Others

OpenAI’s price move puts serious pressure on other AI companies. Google, Anthropic, and smaller players like xAI now have to respond.

Before this, many smaller models were becoming attractive based on price-performance. Now, OpenAI has changed the game by making a top-tier model like o3 cheaper than some smaller ones.

These companies have two choices. They can lower their own prices, which may cut into profits. Or they can try to stand out in other ways—like offering unique features, better customer support, or focusing on special use cases. Some may also lean into open-source models that give users more control and transparency, like Meta’s Llama.

This shift could lead to a more divided market. Instead of everyone competing on price alone, companies might start carving out niches—some focusing on safety, others on speed, and others on custom enterprise solutions.

Conclusion: A Turning Point for AI Access and Opportunity

OpenAI’s massive o3 price cut marks more than just a pricing update—it’s a shift in how advanced AI is used, who can access it, and how fast innovation will move. By lowering costs and expanding options with o3, o3-pro, and flex mode, OpenAI is making powerful AI tools available to more people than ever before.

Whether you’re building the next breakthrough app, adding AI to your business, or just experimenting with new ideas, there’s never been a better time to get started.

Ready to try it for yourself? Experience the power of OpenAI’s models—including o3—right now on SmythOS. Deploy smarter apps faster, scale with ease, and tap into the future of AI development—all in one place.

👉 Get started with OpenAI models on SmythOS today

Article last updated on: Last updated: June 10, 2025