China's AI price war is entering a new phase

China's AI price war is entering a new phase as companies compete on the cost of completing AI tasks.

Long Wei/VCG/Getty Images China's AI price war is moving beyond blanket token price cuts, BofA says.

Companies are increasingly competing on the cost of completing AI tasks, not processing tokens.

US export controls accelerated China's AI push, fueling fiercer domestic competition.

China's AI price war is moving beyond blanket token price cuts as companies increasingly compete on the cost of getting artificial intelligence systems to finish tasks, according to a Bank of America report published Thursday.

The shift follows aggressive price cuts after low-cost Chinese AI models such as DeepSeek intensified competition across the industry.

The economics are now changing, BofA said.

"China's LLM price war is evolving from blanket cuts to tiered pricing," wrote BofA analysts led by Winnie Wu, the bank's head of Asia equity strategy and co-head of China equity research.

Instead, companies are increasingly competing on how efficiently their AI systems complete tasks rather than simply how cheaply they process tokens.

Models with stronger reasoning, longer context windows, multimodal capabilities, and agentic workflows can still command premium prices, according to the BofA analysts.

"Basic inference is increasingly commoditized, while frontier capabilities remain differentiated," the analysts wrote.

"The key economic metric is shifting from price per token to cost per completed task," they added.

The shift also comes as years of US-led export controls have accelerated China's push for domestic AI technology.

The restrictions expanded the market for local suppliers while intensifying competition as more companies entered the sector.