Price wars come for sneakers today, AI giants tomorrow

It’s not what you sell; it’s how much you sell it for. That’s a truth familiar to leaders of companies in innumerable industries, from electric cars to telecoms, where price wars have at various times wreaked havoc on profitability and market values. Investors’ brutal response to an outbreak of discounting in the world of sports shoes is worth watching for those peddling products that may soon experience price wars for the first time — such as AI.

Foot Locker owner Dick’s Sporting Goods this week slashed its forecast of sales growth and operating profit for the year, saying that during the past three months, the athletic footwear market had “got very promotional” — meaning brands such as Nike, which also sell to consumers directly, had hacked back prices, creating a race to the bottom.

What’s remarkable is how much the market hated this turn of events. Dick’s shares fell more than 30 per cent, shedding $5bn of value, or twice what it spent to buy Foot Locker last year in the first place. Other eruptions of price hostilities have elicited similarly negative responses. In March 2025, UK supermarket chain Asda said it would cut thousands of prices even though this would “materially reduce” profit: the resulting two-day sell-off incinerated 13 per cent of rival Tesco’s market capitalisation, with Sainsbury’s not far behind.

Price wars usually feel rational to the instigator, as a way to garner market share or clean out the metaphorical stables. In the case of footwear, Dick’s chair Ed Stack noted that big sports brands had racked up inventory amid a battle between big names and upstarts such as On and Hoka. Working through that surplus could take until next year, he reckoned, though the industry would emerge better for it.

But races to the bottom can drag. Look at the pain Europe’s carmakers face in trying to meet the challenge of cheaper Chinese electric vehicles — or the savage price fighting between US mobile telecoms companies in the late 1990s. Consumers benefited, and the result was widespread adoption of cell phones, but profitability collapsed in the process, and several large regional players were forced to merge for survival.

Such dramas would have recently seemed quaint and distant to executives at big AI companies. But price wars are starting to fire up in Silicon Valley too, as business users of AI squeal at the cost of computing “tokens” and seek out cheaper alternatives. OpenAI slashed the API cost of its lightweight GPT-5.6 Luna model by 80 per cent last month; Anthropic responded with the cut-price Claude Opus 5, and Google has halved the price of Gemini Flash 3.7.

Will this culminate in a Dick’s-like reckoning for the tech dynamos? It hasn’t so far. In fact, Anthropic investors told the FT the company’s IPO could give it a $2tn equity valuation, double what it was worth in May. They may hope lower token prices will inspire more usage and make big players even bigger. But to the extent that large language models are often interchangeable and expensive data centres must be occupied, this price war is liable to end as they usually do: with a trail of losers.

[email protected]