Quietly, without a single headline capturing it, the cost of using capable AI collapsed this year. Not dropped. Collapsed. The kind of model that cost a small fortune to run at scale two years ago now costs cents per million tokens. If your business plan assumed AI would stay expensive, it is time to redo the math.
The new floor
Look at the price list. Strong open models can be self-hosted for the cost of electricity or served through an API for a fraction of a dollar per million tokens. DeepSeek made a steep discount its permanent price. Cheap, fast models from every major lab now handle bulk work for pennies. The premium frontier still charges a premium, but the floor beneath it dropped through the basement, and most work happens near the floor.
Why it happened
- Open weights. Every capable open release drags the whole market price down, because "free to self-host" is a hard number to compete with.
- Efficiency. Smaller models, smarter architectures, and fewer reasoning tokens mean the same result for less compute.
- Competition. A crowded field of labs racing on price as well as capability, because capability alone stopped being a moat.
The interesting question stopped being "can we afford AI." It became "why are we still paying premium prices for the easy 90 percent."
What it changes
Cheap capability changes what is worth building. Ideas that did not pencil out at the old prices suddenly do. Features you rationed by cost you can now offer freely. Whole product categories that assumed a human in the loop for economic reasons get rethought. The constraint moved, and when a constraint moves this far, the design space around it reshapes.
The flip side
I have written before that cheap AI is more dangerous than smart AI, and this is why. The same collapse that lets you build something wonderful for pennies lets someone else do harm at scale for the same pennies. Both are the same story. The price fell for everyone, the useful and the malicious alike, and pretending only the good uses got cheaper is a comforting fiction. Plan for the world where competent AI is as cheap as electricity, because that world already sent its first invoice.