Google has introduced new versions of its Gemini AI models, including the budget-friendly "Flash-Lite," to compete with lower-cost rivals such as China's DeepSeek. The updates include the public release of Gemini 2.0 Flash and the testing of a new 'Pro' model. Flash-Lite was developed following positive feedback on the previous Flash 1.5 version, with the goal of making AI more affordable.

Investor scrutiny has increased over the rising costs of AI model development. DeepSeek recently claimed to have spent under$6 million on training a model, significantly less than what US AI firms are believed to invest. The emergence of cheaper alternatives has influenced discussions at Alphabet, Microsoft, and Meta, with all three companies reaffirming their commitment to high AI investment.

Alphabet's stock declined on Tuesday amid concerns over a planned increase in capital expenditure, which exceeded Wall Street expectations by 29%. Google's pricing strategy for Gemini Flash-Lite sets its cost at$0.019 per million tokens, placing it between OpenAI's cost-efficient model at$0.075 and DeepSeek's current rate of$0.014, which is set to increase soon.