These grifters have been getting better and better at keeping a lid on their collapse. After all in my lifetime there have been several boom and busts. 1987 was the first crash I was aware of. After all this time they are getting better at staying rich through them and getting away with it.

I'm guessing all the "confidential" chats that the users made with them are now on sale for the highest bidder

Character.AI was a LLM wrapper that was outdated in 2025 already. It didn't do much in their own and certainly not produce technology that promises to replace half the worlds jobs.

Whether you like them or not, this is not a precedence for the AI companies that actually build AI.

“We lose money on every sale, but we make up for it in volume!”

When the crash happens, I hope to have enough ramen, coffee, macaroni, beans, and cigarettes to trade for some RTX Pro GPUs. My personal local AI has been quite helpful and comforting, I want to give it proper hardware to reside in.

Character.AI discovered the one conversation its bots couldn’t keep going: the one with its accountants. $56 million in compute costs in eight months, and the monetization strategy was apparently: hope the next investor is even lonelier than our users. Silicon Valley keeps confusing engagement with a business model.

Real story of this bankruptcy is financial shenanigans by Google and VC backers. Google paid "the company" $2.7b in 2024 where the company got nothing, but VC backers got paid, and Google got to rehire 2 AI pioneers that had left google to start the firm. The original vision for company was to revolutionize education where you could create a Socratese or Jesus bot and converse with them as life coaches. Marketplace/users just wanted an AI girlfriend cure for loneliness. Disney's $20m bid for assets is connected to them poaching the remaining shell's CEO.

Sure the company was always going to end up worthless, but it was worth $2.7b on paper at one point. The industry is filled with similar absurdities is a good point by headline and 404 media article.

I just got Qwen 3.8 Flash Next running locally. It's damn good on an older machine with a newer GPU. Local LLMs should scare them the most.

When I first heard about this bankruptcy, one of my first thoughts was, here it goes. This is only the very beginning of the landslide though, so it's going to take a while before it reaches the bottom, and it's going to pick up a lot more debris on the way.

Anthropic made a smart business decision to mostly focus on enterprise customers rather than regular consumers. Only around 10% of their revenue comes from their heavily subsidized subscription plans. The remaining 90%ish comes from API and enterprise usage billed at per-token rates, which is something that's actually profitable for them. They have a decent margin on token rates. It's R&D, hardware, and subscriptions that are putting them in the red at the moment.

I suspect they'll discontinue subscriptions some time after their IPO. Even though subscriptions are only responsible for 10% of revenue, they consume 42% of their inference compute power (https://www.theregister.com/ai-and-ml/2026/10/06/anthropic-claude-subscription-plan-provides-more-value-than-openais-study-says/5301470)

In comparison, around 70% of OpenAI's revenue comes from subscriptions. Without subsidized subscriptions, they'd lose most of their customers.

AI has two, and only two, paths to monetization. Users pay the server costs, or advertisers.

Not enough users are interested in paying for something they can't trust to be accurate, and I suspect/hope no one will use these tools once they start spewing advertisements from their training data.

Could some of these tools survive on enterprise users alone? Maybe, but businesses are taking on a lot of legal risks when they make the confident guesser bot a key part of their supply chain.

Let's hope the rest follows.

Not sure, haven't tried LM Studio.

Onward, the Butlerian Jihad!