The AI margin collapse is gathering pace

I've written a lot about the economics of inference - especially with the advent of "good enough" open weights models. We're starting to see real price competition from all the frontier labs, even Anthropic who have been reticent to reduce prices. Let's dive into the market dynamics. OpenAI fired the starting pistol The original 80% price cut at the very end of July on GPT-5.6 Luna certainly shook the market up, and indeed for the first time in recent memory ended up with a non open weights model briefly taking the top spot on OpenRouter. This was quickly followed by a further 50% price cut on GPT-6 Luna and GPT-6 Sol. In around 2 months, we've seen a 90% price cut in Luna and a 60% price cut in Sol. This is an unusually aggressive trajectory for a frontier lab. Clearly OpenAI is wanting to gain market share, and I think it's proving highly successful. DeepSeek While this article would get too long to go into detail of all the open weights models, I think DeepSeek is the one to watch.…