Facing OpenAI and Anthropic, Google Slashes AI Model Prices, but the Market Isn't Buying It?

TradingKey - On May 19, Eastern Time, at the 2026 I/O developer conference, Google ( GOOGL) launched a price war in the AI model race against rivals OpenAI and Anthropic.

Market reaction was relatively cautious. As of press time, Google shares rose 0.66% in pre-market trading, while Nasdaq 100 index futures gained 0.64%, suggesting that the market has not fully priced in this round of price cuts as a positive catalyst.

[Google shares rise pre-market; Source: Google Finance]

Google has implemented substantial price cuts for its AI subscription services, lowering the top-tier AI Ultra plan by 20% from $250 to $200 per month and introducing an entry-level AI Ultra tier at $100 per month, marking Google's official acceleration into the premium AI assistant market.

This price adjustment comes as competition in the AI subscription market intensifies. Currently, Anthropic's top-tier Claude service starts at approximately $100 per month, while OpenAI's ChatGPT Pro is priced at $200 per month.

Google CEO Sundar Pichai stated at the conference that the move is aimed at lowering barriers for developers and accelerating the expansion of the AI ecosystem, claiming that enterprises could save over $1 billion in annual costs by migrating 80% of their workloads to Gemini models.

Google's Rapid Expansion in Market Share

Google's pricing strategy adjustment stems primarily from its rapid market share expansion. To reach more users, Google proactively reduced prices for its large-scale AI models.

According to Similarweb data, ChatGPT's market share fell from 77.43% to 56.72% over the past year, while Gemini's soared from 6.00% to 25.46%, more than tripling its share. Monthly active users for the Gemini app have surpassed 900 million, doubling in a single year. This rapid catch-up in market share is the driving force behind Google's confidence in initiating a price-based competitive strategy.

On the same day as the Google I/O conference, Google DeepMind CEO Demis Hassabis announced the launch of Gemini Omni, a new generation multimodal model for video generation and editing.

Hassabis noted that the model represents a step toward the company's 'world model' goal, and the Gemini search box will see its biggest overhaul in 25 years, shifting toward an AI agent paradigm. Regarding hardware, the first smart glasses co-developed by Google and Samsung were publicly unveiled, running the Android XR operating system.

Are Price Cuts Merely a Superficial Benefit?

Although Google has slashed its model pricing, institutional analysis indicates that token consumption associated with operational costs has surged nearly fivefold, far exceeding the magnitude of the price cuts. Consequently, enterprises with high token usage may see their total costs rise rather than fall.

Research from independent analysis firm Artificial Analysis reveals that the upgrade to the lightweight base model is accompanied by a nearly fivefold increase in operational costs, suggesting the new model's cost-performance ratio may underwhelm. Simultaneously, AI monetization models are evolving; Google has abandoned fixed daily prompt limits in favor of a compute-based billing logic, where simple text queries incur lower charges while complex multimedia and coding tasks consume significantly more resources.

Over the medium to long term, if price reductions for AI subscriptions succeed in expanding the user base and enhancing developer retention, they will serve as a critical growth engine for Google to reshape its AI commercialization trajectory.