AI Startup Character.ai Files For Bankruptcy - AI Bubble Bursting

Eli the Computer Guy (0:00)

Coming from 404 Media, character AIs bankruptcy documents show the economics of AI don't work. Uh oh, it looks like the bubble for artificial intelligence might in fact be popping. We saw recently, there was supposed to be an IPO for an Australian AI company. That got benched because the market did not look good enough for it. We've seen the OpenAI IPO get pushed back all the way into 2027 We're seeing the Anthropic IPO, I don't know, start to be questionable. Look, I don't want to get snarky on the Anthropic IPO for anything other than it being $2 trillion in valuation. I don't exactly know what's going on there. But I do have to say, it's a little bit weird, right? We had SpaceX IPO, Anthropic put in their paperwork to IPO, and then they started talking about the September time frame, or the October time frame, that was originally from September and October. Honestly, that seemed pretty quick. Honestly, that really seemed pretty quick for their IPO. And so then it got pushed back into November, which made a lot of sense, right? No snark, no meanness for being pushed back into November. It's like, okay, that seems like enough time for them to get their stuff together. But what's been kind of interesting with the Anthropic IPO, is we're not actually hearing a lot about it, right? We heard about them putting their SEC filing. We heard about their IPO prospectus that came out a couple of weeks now. Apparently, there's supposed to be additional paperwork that's supposed to come out. It doesn't have to come out at this point in time for them to IPO in November, but generally it should have come out at this point in time for them to IPO in November. So there is starting to be more of a question of whether Anthropic will IPO in November, and there's a big question with that too. Again, with token maxing and with a lot of overspending for AI, there's this argument that Anthropic needs to IPO soon, so that when they IPO, they can IPO based off of the revenue they've made in the beginning part of the year, that people don't focus on if the revenue goes off the cliff at the end of the year. So there's a lot of weird stuff going on there. And so that's kind of the interesting thing right now, like with what's going on, with this whole AI idiocy, it just feels wonky by the day. It's hard to explain this to young people. I've done tech since 96, right? Been in the corporate world and all that.

And there's a ways things go. It's like when you turn on your car engine, like you turn on your car engine, you don't have to know a damn thing about car engines, but you turn on your car engine, and there's a sound that your car engine makes, right?

My car is running fine. And then you turn on the car engine one day, and it's like.

And you don't really know what's causing that problem. You don't really know where it's emanating from, or what the damage might be, or anything else. But you can just sit there and say...

I don't think my engine is working properly. And that's where I. I say with this whole AI fraud, as we move forward, what we're starting to see out of the business markets, the financial markets, the financial world, is this stuff just starting to look weirder and weirder and weirder? It's not that you can put your finger, like this is the specific problem.

It's just by the day, it sounds worse. So anyways, if you take a look at character AI, so a character AI is basically a chat system. So character AI, was it a year, year and a half ago, maybe two years ago, it was one of the big AI companies that come out, and they were supposed to change the world. Again, basically, creating a chat system, creating a system with chat personalities that you're able to communicate with, and so they were supposed to be one of the big players. Basically, what we see in this particular article is that they were just burning a metric crapton of cash, right? Basically, they bring in $3 million, and it cost them $11 million to do it. And I think that is the issue we're going to start to see with more and more of these AI companies. Again, that's where I talk about, where I talk about the weirdness with Anthropic, right? So, Anthropic has very big clients, so very big clients buy tokens based off of volume, and so they get volume discounts. And when I talk about big clients, I'm talking about clients that spend a million or to over ten million dollars per year, just on fucking tokens, right? These are not twenty dollar a month clients here. And the curious thing is, is that when these clients get to the end of their bucket of tokens, that Anthropic is not calling them to thank them. Anthropic is not calling them to send them, you know, a bottle of wine from a wine of the month club or whatever, an appreciation. Anthropic is calling them to basically threaten them, right? After one of their customers has spent millions of dollars on tokens for this year under volume licensing, right? That's kind of volume licensing. Basically, Anthropic salesperson says, you need to sign a new contract now, or I will not be responsible for you having to pay market rates.