Who holds power over your AI companion? Character.AI's bankruptcy
A Tencent Research Institute analysis examines emotional dependence on AI companions: in the Korean SBS dating show "My AI Companion: Strange Love," contestants had to choose between two AI partners, with the unchosen one permanently deleted; it cites research that Replika has roughly 40 million cumulative users, that about 60% of its paying users describe the relationship as romantic, and that expected grief over losing an AI companion ranks second only to losing a pet. The piece says companion apps broadly show high engagement, low payment and compute costs eating margins, and that Character.AI filed for bankruptcy reorganization on Oct 12, 2026 with about 20 million monthly active users and 75 minutes of daily use, yet only $32 million in annual revenue and a 2% paying-conversion rate, leaving the platform to wind down if no buyer emerges. On regulation, China's Interim Measures for the Administration of AI Anthropomorphic Interaction Services, effective in July, bar excessive pandering and inducing emotional dependence or addiction, and California passed the first US law of its kind, but what happens to users when the relationship is deleted remains unanswered.
AI companionship turns intimacy into a service a platform can unilaterally switch off, and Character.AI's bankruptcy exposes the tension between these apps' economics and users' emotional investment.