AI Graveyard Grows as Character.ai, Relay and Major Products Fail
AI failures mount as Character.ai files for bankruptcy, Relay closes, OpenAI retreats, and 42% of corporate AI initiatives are abandoned amid weak demand.
Summary
S&P Global Market Intelligence says 42% of corporate AI initiatives are abandoned over funding, technology, competition, scale or demand. Relay, a five-year-old Zapier rival, closed in August as OpenAI and Google embedded similar automation. Character.ai, founded in 2021 by ex-Google researchers Noam Shazeer and Daniel De Freitas, raised $150 million at a $1 billion 2023 valuation; Google reportedly paid $2.7 billion in 2024 to license its technology and rehire them. Lawsuits alleging teen suicide and self-harm, Disney’s cease-and-desist, an under-18 open-chat ban in late 2025 and early-2026 settlements preceded its early-October bankruptcy. Disney bid $20 million for some IP; the app remains live, with a sale due by early December.
OpenAI reversed its criticized July 9 ChatGPT redesign merging Chat, Codex and Work and renaming the original ChatGPT Classic; it closed high-cost, low-retention Sora in March 2026, discontinued under-year-old browser Atlas on August 9, folded Atlas and web agent Operator into ChatGPT, and reduced DALL-E’s standalone role. Apple’s 2024 Apple Intelligence promise of contextual, cross-app Siri slipped over bugs, contributing to a $250 million iPhone 16 marketing settlement; Siri AI entered July’s iOS 27 beta and reached English users in October, with more languages next. Microsoft delayed 2024 screenshot-search tool Recall nearly a year over exposure of passwords, messages and finances; post-redesign extraction revived concern. Notion Mail, launched April 2025, closes September 22 because users favor separate agents. Humane raised $230 million, issued an AI Pin charging-case fire warning, closed in February 2025 and sold most assets to HP for $116 million. Rabbit sold 100,000 R1s after CES January 2024; despite poor reliability and integrations, updates and Project Cyberdeck continue. NotebookLM alumni’s audio app Huxe closed May 2026 as Spotify expanded AI audio. Yupp, a crypto-reward comparison tool with 800-plus OpenAI, Google and Anthropic models, closed March 2026 for weak fit. Free role-play service Figgs AI ran in 2023 to 2024, drew 1 million users and closed over costs.
Positives
- Siri AI reached English-language users in October after appearing in the iOS 27 beta in July, with additional languages expected next.
- Rabbit continues improving the 100,000-selling R1 and has announced Project Cyberdeck as its next portable hardware project.
- OpenAI preserved useful Atlas and Operator capabilities by integrating them into ChatGPT rather than eliminating them outright.
- Character.ai remains operational during bankruptcy, with its sale expected by late November or early December.
- HP acquired most Humane assets for $116 million after the AI Pin business closed.
Risks & concerns
- 42% of corporate AI initiatives are ultimately abandoned because of funding, technical, competitive, scaling or demand problems.
- Character.ai entered bankruptcy after teen-harm lawsuits, Disney’s intellectual-property challenge and mounting legal, regulatory and operational pressure.
- Relay closed after OpenAI, Google and other platforms erased much of the five-year-old company’s standalone advantage.
- Microsoft Recall can archive passwords, private messages and financial details, while a researcher extracted captured data after its redesign.
- Humane closed its AI Pin business after performance failures and a charging-case battery fire warning, despite raising $230 million.
- Sora, Huxe, Yupp and Figgs AI closed as operating costs, retention problems, platform competition and weak product-market fit proved unsustainable.