Option C is the correct solution because AWS AppConfig is purpose-built to manage dynamic application configurations with low latency, strong validation, and minimal operational overhead, which directly matches the company's requirements.

AWS AppConfig enables the company to centrally manage model selection logic, inference parameters, and customer-tier routing rules without redeploying Lambda functions. By using feature flags, the company can easily perform A/B testing of new models or prompt strategies by gradually rolling out changes to a subset of users or customer tiers. This allows experimentation and controlled releases without code changes.

AppConfig also supports JSON schema validation, which is critical for validating parameters such as temperature, maximum token limits, and other model-specific settings before they are applied. This prevents invalid or unsafe configurations from being deployed and reduces the risk of runtime errors or degraded model behavior in production.

Using the AWS AppConfig Agent allows Lambda functions to retrieve configurations efficiently with built-in caching and polling mechanisms, minimizing latency and avoiding excessive calls to configuration services. This approach scales well for high-throughput, low-latency applications such as GenAI APIs behind Amazon API Gateway.

Option A introduces unnecessary redeployment logic and polling complexity. Option B requires building and maintaining custom configuration access patterns in DynamoDB and does not natively support feature flags or schema validation. Option D adds operational overhead by requiring ElastiCache cluster management and custom validation logic.

Therefore, Option C provides the most scalable, flexible, and low-maintenance solution for dynamic model switching, A/B testing, and safe configuration management in a GenAI application.