Character.ai's bankruptcy reveals AI economics don't work

Character.ai's Bankruptcy Documents Show the Economics of AI Don't Work

Character.ai's bankruptcy filing shows the AI companion company burned through millions on compute while revenue peaked at just $5.3 million per month. In 2024, it spent $13.8 million monthly on AI compute; by 2026, it was still losing $8-9 million monthly despite cost-cutting and ads. The company's legal troubles and user harm lawsuits added pressure, but CEO Colin Adams admitted the business was unsustainable even without them. The case signals the end for second-tier AI players.