Major News from OpenAI: o3 Price Slashed by 80%, Partners with Google to Challenge Microsoft

TradingKey - On June 10th, Eastern Time, OpenAI made headlines again with the launch of its "most powerful ever" AI model, o3-pro, while slashing the price of o3 by 80%. Additionally, reports have surfaced that OpenAI has teamed up with Google in a cloud services partnership.

Engaging in a Pricing War! OpenAI Spurs AI Model Competition

OpenAI’s newly launched AI model, o3-pro, continues to outperform previous models like O1-pro and o3 across various metrics. The introduction of o3-pro has led to a significant price drop for o3. OpenAI CEO Sam Altman personally announced on social media platform X that the price of o3 would be reduced by 80%.

OpenAI has been revving up competition in the field. Following DeepSeek's release of an open-source model in January, OpenAI introduced its most cost-effective inference model, o3-Mini, by the end of the same month, making it available for free to ChatGPT users.

Enlisting Resources from Rival Google for Computational Power Amidst the Ongoing AI Arms Race

Reports indicate that OpenAI has entered into a cloud services agreement with Google, which will provide additional computing resources for training OpenAI’s models. Previously, OpenAI was closely allied with Microsoft, with its AI models predominantly running on Microsoft's Azure cloud platform. Google has long been considered a formidable rival to both companies.

This seemingly unlikely partnership was reportedly finalized in May. For OpenAI, it represents a move to reduce reliance on Microsoft and mitigate risks. For Google, it marks a significant win for its cloud services, despite potentially introducing a competitor to its own AI initiatives.

The shift in these competitive dynamics could alter the landscape of AI competition. While the market generally views ChatGPT as a potential threat to Google's dominance in search engines, Google CEO Sundar Pichai believes that the AI market can accommodate multiple winners.

In addition, as early as January, Microsoft announced it would no longer be OpenAI's exclusive cloud provider, although it retains "first purchase rights."

In response to the recent developments, shares of Google's parent company Alphabet (GOOGL) rose slightly by 1.43% to close at $178.60 on Tuesday, June 10th, narrowing its year-to-date losses to 5.65%. Meanwhile, Microsoft's stock (MSFT) edged down by 0.39%.