Artificial intelligence
fromComputerworld
2 days agoThe world of AI tokens - and why they matter
Tokens are the fundamental data units LLMs process and the basis for measuring, pricing, and consuming AI compute at massive scale.
For 1 million tokens, GPT-5.5 is priced at $5 (input), $0.50 (cached input), and $30 (output). Its predecessor GPT-5.4 charges $2.50 (input), $0.25 (cached input), and $15 (output) per 1 million tokens.
ChatGPT prices were inflated since the service's inception, with price levels reaching an eye-popping 100 to 200 times competitors' prices on a per-token basis amidst a February 2025 price war. A secretive agreement struck between OpenAI and Microsoft early in OpenAI's development allowed Microsoft to control the supply of compute to its horizontal competitor's products. It used an exclusivity clause to restrict OpenAI's product output, and to impose a price-or, conversely, output and quality-floor on its competitor OpenAI's ChatGPT products.
AI companies can capture 25% to 50% of value created, compared to only 10% to 20% for traditional SaaS products, highlighting the potential for increased profitability and pricing strategies in the AI space.