Several artificial intelligence startups and products have shut down, entered bankruptcy or undergone major changes in 2026 as companies face rising operating costs, stronger competition and difficulties retaining customers. Recent examples include automation startup Relay, conversational AI platform Character.ai and several discontinued products from larger technology companies.
According to S&P Global Market Intelligence, the proportion of organizations abandoning most of their AI initiatives before production increased from 17% to 42% in its 2025 research. The average organization also discontinued 46% of its AI proof-of-concept projects before deployment.
AI Startups Face Shutdowns and Bankruptcy
Relay, an AI-powered workflow automation platform positioned as an alternative to Zapier, shut down in August 2026 after five years of operation. Its closure followed growing competition from OpenAI, Google and other companies integrating automation capabilities into existing products.
Character.ai filed for Chapter 11 bankruptcy protection on October 12, citing legal, regulatory and operational challenges. The company, which raised $150 million at a $1 billion valuation in 2023, continues operating while pursuing a court-supervised sale, with Disney offering $20 million for a license to certain intellectual property.
Other discontinued services include Huxe, an AI audio application developed by former Google NotebookLM employees, and Yupp, which allowed users to compare responses from more than 800 AI models. Huxe closed in May, while Yupp ceased operations in March after failing to establish sufficient product-market fit.
Figgs AI, which offered customizable AI characters, also shut down after reportedly attracting more than one million users. Its developers cited the cost of maintaining a free service.
OpenAI and Apple Encounter Product Challenges
OpenAI has also discontinued several standalone products, including its Sora video-sharing application in March and ChatGPT Atlas browser in August. The company incorporated selected Atlas capabilities into ChatGPT and Codex while also consolidating features from Operator and its image-generation products.
OpenAI also reversed a July redesign that divided ChatGPT into separate Chat, Codex and Work modes following complaints about the interface.
Meanwhile, Apple’s upgraded Siri experienced repeated delays after its initial announcement in 2024. The AI-powered assistant entered beta testing in July 2026, with English-language availability beginning in October.
Microsoft, Humane and Rabbit Face Different Outcomes
Microsoft delayed its Recall feature for nearly a year following privacy concerns about its automated screenshot collection. Subsequent security research continued to raise questions about the protection of information captured by the Windows feature.
AI hardware company Humane discontinued its AI Pin in February 2025 after performance problems and battery safety concerns. HP acquired most of Humane’s assets for $116 million, considerably less than the $230 million the startup had previously raised.
Rabbit, however, continues developing its R1 AI companion despite criticism of its initial functionality. The company has released software updates and announced Project Cyberdeck, a portable device intended for AI-assisted software development.
Notion also announced plans to discontinue Notion Mail after observing that users increasingly relied on separate AI agents for managing email.
Featured image credits: Magnific.com
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