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.
For real. Banksters and other shitty people don't even see jail time for crashing someone's livelihood.
There are going to be bail outs and a lot of working class people are going to have issues with their retirement funds with this bubble. The rich will always stay rich.
Character.AI was a LLM wrapper that was outdated in 2025 already.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.
Not sure, haven't tried LM Studio.
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.
If LLMs can't be made more power efficient, then the technology isn't ready yet for general use. There may have to be fundamental engineering breakthroughs before what these systems do can be more than a very expensive and inefficient worldwide proof of concept.
Of course, the military and the surveillance industry will still want to keep it, even if no one else can afford it, and we'll be the ones paying for it.
They CAN be made more efficient. Hell, AMD just bought a company that translated LLMs to direct silicon... which should enable scalability if it wasn't for one of the key players owning the tech thus limiting its use.
It's also estimated that some 70% of Claude tokens gets spent on recursive self-correction so the output is higher quality. Instead of bettering the model, Anthropic just keeps throwing money at it to make the problem go away.
Meanwhile Chinese models - as small as 36-40-80b params - are outdoing these fancy frontier models if the right harness is used.
I've spent the last month or so using nothing but a local 27B Qwen model as my coding assistant and it's working fine. The big American AI companies could all collapse in ruins tomorrow and it's not going to slow things down all that much, anyone who wants to use AI will be able to continue using it. Might even be better in the long run if that happens - the people who are scared of ASI will get their much-demanded temporary slowdown at the frontier while everyone else catches up with open-weight models that everyone can use without central control.
Pity about the economy in the meantime, I guess.
anyone who wants to use AI will be able to continue using it
Anyone who's privileged enough to have the hardware.
“We lose money on every sale, but we make up for it in volume!”
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.
It's R&D, hardware
"Yeah, besides those integral parts of our costs, we're profitable"
😅.
It's like a hair dresser saying "If I don't count the rent of my shop and all the supplies, I'm profitable".
Anthropics numbers are probably better than OpenAIs, but i am willing to eat my boots (with ketchup and mustard tho) if they are even close to profitable at API pricing.
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.
Or, as the article optimisitically puts it:
The fate of Character.AI, the controversial AI companion platform, may come to stand as a warning.
Wrong. Character.AI may come to be seen as the first car in the train to derail.
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.
This is a most excellent place for technology news and articles.
