Why OpenAI Might Slash Prices for Users

0:00The spirit of innovation is deeply ingrained in America, and Google is helping Americans innovate in ways both big and small. Working with NOAA's National Hurricane Center, Google's latest AI model is providing experimental tropical cyclone simulations, bringing earlier and more accurate guidance to weather agencies and emergency service experts. This is a new era of American innovation. Learn more at g.co.com.

0:32OpenAI weighs major price cuts as businesses begin to scrutinize soaring AI bills. Plus, Canada proposes banning social media for teens. And mounting opposition to data centers prompts a rapid rethink in how the industry sources its power. The utility companies try to provide them the power. But remember, it's a freeway and a highway paid for by the ratepayer. And if one ratepayer was consuming all that power and everybody else was paying their tolls for that road, people got upset. It's Thursday, June 11th. I'm Luke Vargas for The Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today.

1:17The war for AI customers is leading OpenAI to consider drastic price cuts. We are exclusively reporting that the ChatGPT maker is weighing significant cuts to what it charges for tokens, the unit that AI firms use to bill for their products, anticipating that similar cuts could be coming at rival Anthropic. The price war could be an early test of both companies' revenue streams ahead of hotly anticipated public listings and comes as executives around the world begin to balk at the high prices for AI usage. Cindy Rose is the CEO of advertising giant WPP and had this to say at the WSJ Leadership Institute's CEO Council Summit in London.

1:57In the marketing space, we're using the very expensive models because we're doing frontier reasoning, we're doing high-resolution video and audio where there's no deflation, just cost increase. So this is the problem or the sticker shock that most companies haven't yet experienced but will. I think the Uber CTO went public recently and said he burned his entire 2026 token budget in four months. Same at WPP. I've got more agents than employees now, and there's a lot of unbudgeted costs associated with it. Now the pivot needs to be towards token consumption optimization, which is the next chapter.

2:34OpenAI confidentially filed for an IPO earlier this week. And we report that CEO Sam Altman told employees in a Slack message that the company plans to go public within the next year. Guardrails erected around Anthropic's next-gen AI model are stirring a user backlash. Tech reporter Sam Schechner told me that it didn't take long after Tuesday's release of Clawed Fable 5 for AI experts and researchers to start complaining about restrictions within the powerful model.

3:03Luke Vargas:The new model that Anthropic released Tuesday is an update to the Mythos model that the company first put out in April and said was too dangerous to release widely. And so what they did is they added pretty intense restrictions to what it can do to help mitigate those risks. And some users definitely reacted poorly to it. Sam, some of these were very, you know, noticeable. You got a pop-up saying, if you're prompting it on questions around bioweapons or cybersecurity, that said, you know, we're going to steer you now to a less capable model. Some users reported that the model is actually stricter than that and was blocking by benign topics like math or biology or chemistry.

3:43And yet there was a separate cohort very frustrated that some of the safeguards were not so obvious.

3:48Luke Vargas:Yeah, I think we've seen models sort of redirect conversations before. But what really rankled people, especially in the academic AI area and in the open source AI field, was that Anthropic said that it would degrade the quality of its responses about high-end AI development, intentionally to make it less useful for developers looking to build AI tools. The justification for this was national security in its own terms of service, that you're not supposed to use the AI that way and that others who are not scrupulous might build AIs without the same restrictions that Anthropic builds. But, you know, users reacted with intense frustration.

4:29Luke Vargas:They said it was gatekeeping. They were trying to harm potential competitors and muddying just general AI research into the capability of Fable and Anthropic actually reversed part of these safeguards after the outcry. And so instead of silently degrading Fable's ability to do high end AI research, it simply will tell users that it's not going to do that. That was Journal Tech reporter Sam Schechner. And Canada is moving to block younger teens from social media. The SAFE Social Media Act would temporarily ban children under 16 from platforms like Snapchat and Meta's Instagram, and tech firms that fail to comply could face sweeping fines of up to 3 % of their global revenue.

5:13The move comes amid a growing wave of age-based digital restrictions, following in the footsteps of Denmark and Sweden, which have weighed similar actions, as well as Australia, which last year became the first nation to implement a strict social media ban for under-16s. While advocates point to escalating youth mental health crises, critics and tech companies argue that the bans are counterproductive and easily bypassed.

5:40Oracle shares have slumped off hours despite surging cloud revenue. The company reported a 47 % increase in its cloud infrastructure business to nearly$10 billion. But co-CEO Clayton McGuirk also issued a blunt warning that the huge expenses for its data centers are likely to weigh on margins. And then anyone that thinks that these things are easy to operate is very confused. You're not just buying a single rack and putting it into your data hall. These are extremely complex clusters that require constant care and feeding, constant maintenance across the network and the hardware itself. Oracle is expecting a net cash outlay for capital expenditures of around$70 billion for the coming year.

6:20And striking UAW workers at GM parts supplier Dowk have reached a tentative agreement, potentially ending a 10-day walkout. The deal could return almost 1 ,000 employees to producing axles for GM's Chevy Silverado and GMC Sierra pickups, though ratification isn't guaranteed. Workers have been pushing to raise the current $22 top hourly wage closer to the$29 they earned before recession-era cuts. Coming up, can the World Cup's kickoff silence FIFA's critics? And I'll speak to the CEO of Bloom Energy about how the company is navigating opposition to new data centers. That's after a short break. I'm Laura Thurow, Managing Director with Baird Private Wealth Management.

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7:38Can the power grid keep up with AI? According to the CEO of Bloom Energy, which makes fuel cells that businesses can use to generate electricity on site, predominantly through natural gas, the answer is no, both practically and politically, as opposition to new data centers mounts. In conversation at the WSJ Leadership Institute's CEO Council, I asked K.R. Schreeder what to make of the rapid shift in public opinion about the AI buildout. A year ago, we were seeing in Oval Office events, announcements of new data centers. These were being talked about by the president as symbols of innovation and of job creation.

8:16Now the pitchforks are out. They're out because people are worried about multiple things. The first thing is the grid simply cannot support gigawatt data centers. The grid was not built to be able to do that. The grid was a flywheel that was supposed to take care of a lot of retail customers. If you are one single large customer that's going to suck up most of the electricity coming from a substation, whether you're an aluminum smelter in the past, whether you're a glass making factory, they all depended on their own on-site power, bring your own power, right? So these big data centers today consume a lot more power than even those aluminum smelters.

8:58And for them to have naively thought that they can rely on the grid for that kind of power was wrong. Doomed to fail. Doomed to fail. And at some scale, it was going to break. But even before that happened, the utility companies tried to provide them the power. But remember, it's a freeway and a highway paid for by the rate payer. And if one rate payer was consuming all that power and everybody else was paying their tolls for that road, people got upset. You're not surprised about the public backlash. You shouldn't be surprised at all. Absolutely not. Absolutely not. So then you get to the next point of saying, bring your own power.

9:38But these data centers, unlike the aluminum smelters, are not built far away from people. They're built in cities and towns. Who wants a big power plant in their backyard? Immediately, your property values are going to go down. The amount of air pollution is going to go up. The water usage is going to go up. And what is the benefit for the local community that's bringing that in? Not much. Because it's not creating the thousands of jobs like an automotive plant would. For those reasons, you saw social unrest. When we bring a bloom unit there, we don't consume water. We don't burn the natural gas, so we don't create any air pollution.

10:17And yet, do you not risk being swept up in the broader pushback against AI infrastructure? The community says, I don't care how you're powering the data center. We just don't want it, period. I don't think there's anything that's NIMBY-proof. We are not NIMBY-proof, okay? But if you want development, we are the best possible alternative that you have, best possible choice you have. That's the first thing. The second thing is AI definitely accelerates our business. But our business was growing at 40 % a year with us being a profitable company by providing on-site power. Is there not a way to make the grid work for data centers?

10:55Similar to if you just take a very large load like the AI loads, half a gigawatt gigawatts. Even if you can make it work, it's probably the most inefficient, worst way for you to be powering the data center. Even if you can make it work. The reason is you're generating the power very far away. You know exactly where it's needed. Why are you using copper wires and transmitting all that power and losing power along the way? Second thing, you're converting a molecule to electricity. You generate some amount of heat. If that heat is right next to the point of use like a data center, you can use that heat for cooling, and the data centers require a lot of cooling.

11:39Instead, here, you waste that heat, and then you use more electricity to do the cooling. Number three, the large power plants on the grid provide AC power. Alternating current is what that's called. Our chips use direct current or DC power at low voltage. We natively produce DC power at 800 volts to be able to supply directly to the racks, and this is where the future is. As long as you depend on a pole and wire, you're going to use backups, because the pole and the wire is going to fail. That's called a power outage, right? You're going to have that all the time. So you need backup generators, whereas if you're producing power on-site, reliably, modularly with fault tolerance, how we build it, you don't need any of that backup.

12:26For all those reasons, the grid would be a terrible way to power a data center. K.R. Sridhar is the founder, chairman and CEO of Bloom Energy. K.R., thanks for a great conversation. Thank you so much. And to hear my full interview with K.R. Sridhar, check out the link we've left in our show notes. And finally, the World Cup wait is over. The five-week 104-match fiesta jointly hosted by Canada, Mexico, and the U.S. is getting underway at 3 p.m. Eastern today when Mexico faces off against South Africa. It's a kickoff that Journal Sports Editor Joshua Robinson says will test FIFA President Gianni Infantino's wish that pre-tournament drama will end as soon as play starts.

13:10At Infantino's pre-World Cup press conference, most of the questions weren't about soccer. They were actually about the controversies leading into this tournament, namely high ticket prices, officials being turned away at the US border, and the uncertainty around Iran, which is actively at war with the United States. Infantino's message, and I quote, maybe sometimes it's also good to chill, relax. I also asked him about his relationship with President Trump, which has been widely criticized because it appeared to politicize the World Cup. But Infancino, who has been cozying up to the Trump administration for close to a decade, had nothing but praise to lavish on the U.S.

13:45president. He said that the World Cup would not have been possible without Trump. The U.S. opener against Paraguay is set for tomorrow, while heavyweights Brazil, Germany, and the Netherlands will enter the fray this weekend. And that's it for What's News for this Thursday morning. Today's show was produced by Hattie Moyer. Our supervising producer is Sandra Kilhoff. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.