The Morning Download: AI Enters Valuemaxxing Era

Good morning. Open source AI models, including those developed in China, are getting traction as an AI price war breaks out.

Given soaring demand and shortages for critical supply chain components such as memory chips and computing capacity, the cost of running leading, proprietary AI models has become a concern even for larger companies.

“Big companies and startups are increasingly turning to tools that tap in to cheaper AI models, including some from China,” The Wall Street Journal’s Bradley Olson and Tina Li report. “That’s raising pressure on industry leaders OpenAI and Anthropic to lower their prices, a prospect that could hurt their ability to grow into profitable enterprises.”

More highlights from their coverage:

• The new cost-saving tools help businesses save on AI costs by dynamically switching among a mixture of third-party AI models and in-house AI systems built using freely available, open-source models.
• The agents only tap the most capable versions of OpenAI’s ChatGPT and Anthropic’s Claude for more complex tasks. That can reduce costs for some AI-assisted work by as much as 95%, according to executives using the tools.

OpenAI is considering drastic cuts to the prices it charges AI users, ahead of similar cuts the company expects at Anthropic, The Wall Street Journal reported.

U.S. companies including Microsoft and Nvidia are offering cheaper models as open source models gain market share.

I doubt that demand for frontier models is going away. One veteran startup founder told me recently that even if a leading model outperforms the pack by 2%, entrepreneurs won’t handicap their business by settling for second best. For many companies and many applications, that performance edge is critical.

But companies that use frontier models don't necessarily need them for all of their workloads. And as the use of AI expands among individuals and companies, a bigger toolbox with more options that help users optimize price-performance is a necessity. Legroom and living-room level bucket seats notwithstanding, you don’t need to drive a land yacht to the local convenience store just to buy a quart of milk.

How is your company keeping a lid on the cost of running AI? Let us know.

How a data center led to $50K teacher bonuses. As public opposition to data centers continues to rise across the U.S., hypescalers may need to refresh their talking points to include  stories like Louisiana's Richland Parish.

The Journal reports that Meta's $10 billion Hyperion data center project there has driven a surge in local sales tax revenue, enabling some teachers to receive bonuses of up to $50,935 this year, funded by a 1% sales tax dedicated to teacher pay since 1968.

The windfall is largely tied to temporary construction-related spending. Once construction of the data center is complete, Meta will pay property taxes on the completed facility, but at a discounted rate.

• Elon Musk’s SpaceX is set to make its stock-market debut Friday in the largest IPO ever—and perhaps the most closely watched, says the Journal.  Its performance today will be a crucial gauge of investor appetite for mega-offerings from OpenAI and Anthropic expected later this year.

• Google sued a group of scammers that used its Gemini AI to generate thousands of fake telecom and brokerage websites, allegedly stealing an estimated 3.87 million credit card numbers and causing $1.9 billion in losses since 2023. 

• U.S. tech companies including Anthropic, OpenAI and Databricks are rapidly building up their presence in London, drawn by the city's deep frontier-AI talent pool rooted in DeepMind and top universities, CNBC reports. 

• Jeff Bezos in an interview with the WSJ dismissed AI job loss fears, predicting that “there’s going to be so much productivity” and with it, new jobs. The billionaire is co-leading a new business called Prometheus, which plans to build an AI tool designed “to empower engineers and make an invention easier and faster, so smaller teams can do much bigger things on much shorter time cycles.” Prometheus, which said it is valued at about $41 billion, has raised $12 billion from investors.

• Amazon said its global data-center operations withdrew about 2.5 billion gallons of water in 2025, as data center companies around the world face growing scrutiny over the environmental impact of artificial intelligence. The company said water use at sites it owns and operates directly fell 2% from 2024 levels, even while it expanded its data-center footprint.

Listen to the WSJLI's Isabelle Bousquette discuss her story on Manhattan's AI office boom on WNYC.

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Follow Isabelle Bousquette on LinkedIn, Instagram, X, and TikTok for more behind the scenes on her tech and AI coverage, and lately, her contributions to the WSJ Leadership Institute's new Executive Resilience series, where she's profiling America's top execs about their fitness and wellness habits.

Follow Belle Lin on LinkedIn and X for her latest reporting on enterprise technology and AI.

Steven Rosenbush is chief of the enterprise technology bureau at the WSJ Leadership Institute. He also has a column. You can follow him on LinkedIn.

Tom Loftus is the editor of The Morning Download. He suggests following Isabelle, Belle and Steve on their various social channels. But if you insist, here's his LinkedIn.