Vol.058 — The AI Price War Isn’t New. Ask Japan and America How It Ended Last Time.
Date: 2026-07-14 | Newsletter
Key Summary
This week the AI labs stopped fighting over who is smartest and started fighting over who is cheapest — Grok 4.5 and Meta’s Muse Spark undercutting the frontier by more than half, DeepSeek and the Chinese open weights down at a few cents and now about 61 percent of model traffic on OpenRouter. Zenta reads it as a movie business owners have seen before. He asks readers to hold two facts in the same hand: cheap is the token, not the control — renting by the sip costs cents, while owning the tap (an eight-GPU server for a frontier open model) runs roughly $250,000 to buy or $17,000 a month to rent. Then he rewinds 25 years to the broadband price war. Japan’s crowded field — Yahoo! BB at 2,280 yen, free modems in red bags — collapsed to three names. America’s dozens of challengers went bankrupt in a single year and consolidated into a duopoly that never got as cheap as Japan’s. His three takeaways: do not marry today’s cheapest vendor, because the field always looks endless right before it collapses; the winner is not whoever is cheapest, since Yahoo! BB won on cheaper AND faster; and once this becomes plumbing you cannot run without, switching gets hard and prices firm up — so use the war, but build so you can move. Do it simple. When something is racing to cheap, do not fall in love with the price. Ask who will still be standing when it becomes plumbing – and pick for that.