AI Insights

Character.AI Explores Sale or New Funding Amid Rising Costs

Published

2 weeks ago

August 21, 2025

Character.AI is weighing its options between a potential sale or raising new capital, sources told The Information.

The maker of artificial intelligence (AI)-powered character chatbots has, in recent weeks, held discussions with possible buyers, bankers and staff. Executives have also talked with investors about raising “a few hundred million dollars at a valuation of more than $1 billion,” according to one person with direct knowledge of the conversations.

Founders Noam Shazeer and Daniel De Freitas, both former Google researchers, agreed last September to rejoin the tech giant to work on Gemini. After they left, Character.AI’s employees took over ownership of the now roughly 70-person startup.

If sold, the buyer would get its app and website, which host chatbots designed by the startup and independent creators. These bots resemble anime characters, celebrities and historical figures.

In June, Character.AI hired a new CEO, Karandeep Anand, a former Meta and Brex executive. This month, the startup launched a social feed for sharing AI-generated videos and collaborative content creation, while also selling ads from brands such as Yelp and Webtoon.

Character.AI’s trajectory is an example of a new trend called a “reverse acquihire,” where founders and researchers of smaller AI firms move to Big Tech companies in exchange for licensing deals. Similar arrangements have played out at least six times since early 2024, often leaving the remaining startups struggling for survival.

For example, Google in July hired top executives from coding startup Windsurf in a $2.4 billion licensing deal. Windsurf was then sold to Cognition at an undisclosed amount.

Character.AI makes most of its revenue by charging $9.99 per month for premium features such as voice calls with chatbots. The startup expects to reach $50 million in annualized revenue by the end of the year, up from about $30 million last month, according to news outlet. At a $1 billion valuation, the startup would be trading at 33 times recent revenue, which is roughly in line with other AI apps.

The platform has grown to 20 million monthly active users as of February, but the costs of running large-scale AI models continue to climb. It stopped developing its own models after the founders and technical leaders left, and now relies on open-source models from DeepSeek, Meta and others. This reduced development expenses but left Character.AI with ongoing operating costs estimated in the millions per month.

Meanwhile, the startup is facing two lawsuits alleging that it exposed children to harmful content. Texas Attorney General Ken Paxton also launched an investigation earlier this month into whether the startup misled children through deceptive marketing.

California also has been advancing a bill that would regulate the use of AI companion chatbots. Senate Bill 243 is one of the first major attempts in the U.S. to regulate AI buddies, especially for its impact on minors. The bill would require chatbot companies to ban reward systems that encourage use, send reminders to users that the chatbot isn’t human and perform regular audits, among other stipulations.

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AI Insights

Get 50 percent off subscriptions

Published

1 hour ago

August 31, 2025

The Editors

If you want to brush up on some skills or learn new ones, MasterClass offers a good way to do just that. The streaming service has hundreds of classes taught by professionals and experts in their fields, and now you can get a subscription for 50 percent less than usual. All MasterClass membership tiers are on sale right now, so you can sign up for as low as $5 per month.

With a subscription, you could watch a class on writing taught by James Patterson, or learn cooking techniques from Thomas Keller. If you’re trying to impress at your next pickup basketball game you could learn about shooting, ball-handling and scoring from Steph Curry. Each class includes around 20 video lessons that run about 10 minutes long on average, as well as an in-depth workbook.

MasterClass

A MasterClass subscription is 50 percent off during this Labor Day sale.

$96 at MasterClass

MasterClass has also begun producing some original series for its platform. The series Business Rebels features different CEOs walking viewers through the strategies that helped them disrupt their industries. One entitled Skin Health features top dermatologists and a cosmetic chemist walking viewers through keeping their skin healthy through cleansing routines and specific beauty products.

The wide range of skills or life lessons you could learn through these classes is why MasterClass is on our list of best subscriptions you can give as gifts. Maybe your loved one who loves to host dinner parties could use some tips from Gordon Ramsay.

There are three subscription tiers for MasterClass that each differ only in how many devices they allow at one time, and whether offline videos are supported. The Standard subscription only supports one device, whereas the Plus subscription allows two. These are normally $10 and $15 per month, respectively, and neither offers offline mode. The Premium tier, which carries a regular price of $20 per month, allows up to six devices and features offline mode for downloaded classes.

All three tiers are part of the 50 percent off sale, which marks them down to $5, $8 and $10 respectively. MasterClass bills annually, so be sure to calculate the total from the “monthly” price before deciding.

Follow @EngadgetDeals on X for the latest tech deals and buying advice.

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AI Insights

AI converts ASCII game to real-time AI-rendered graphics – Thunder Lizard ASCII visuals transformed, but latency and consistency need improvement

Published

2 hours ago

August 31, 2025

The Editors

Software engineer Jeff Schomay has been experimenting with techniques to transform game visuals using artificial intelligence-powered rendering. In a recent blog post, he shared screens from his Thunder Lizard “old-school ASCII RPG style game” and you can see various AI models reconstructing the title’s basic character-based visuals into far plusher full-motion graphics. However, there are quite a few compromises needed to achieve a ‘playable’ 10fps and 1ms latency AI visual enhanced game.

The current game

You can play Thunder Lizard, using the current ASCII rogue-like engine visuals, right now, via that link. In brief, you use the cursor keys to navigate around the prehistoric landscape while attempting to catch and east smaller dinosaurs, while avoiding larger ones. You grow as you eat smaller prey, but you have to flourish enough to become the most powerful dinosaur before the volcano destroys the entire landscape.

Cake and eat it – not possible

As Schomay put it in his blog post, there is a “need for speed” in gaming, that isn’t yet met by many AI renderers. At least concerning what is available to indie devs.

We get to see some fantastic looking prehistoric landscape renderers, which would really add something to Thunder Lizard. However, the software engineer couldn’t coax better than “a four-second latency, it was unplayable” from the most handsome AI game graphics renderer.

Fal.ai. This model beat the other contenders for its “very fast generation times, source image adherence, and decent look and feel,” according to the software engineer.

AI rendered ASCII game in real time – YouTube

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Though what you see is an (AI) engine capable of just 10fps and 1ms latency, it’s the best option, according to Schomay’s efforts, in this case.

Pixel peepers might feel a little let down by the chosen AI visuals, which eventually won out. However, Schomay ends his blog on an upbeat note, stating that “it is amazing to see AI image generation happen in real-time.” He is also excited about the future, but hopes some strides can be made in frame to frame consistency.

We’ve previously reported on the use of AI in developing and enhancing games and graphics. Nvidia shared a lot of RTX technology reliant AI-enhanced development tool information earlier this year.

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