Rabbit employees haven't been paid, while company teases new AI hardware (www.tomsguide.com)

Rabbit — the startup behind the CES 2024–lauded Rabbit R1 wearable assistant — is facing a payroll crisis even as its CEO teases next‑gen AI hardware. Tom’s Guide reports multiple sources and documentary evidence that Rabbit has been late on payroll since January 2025 (typically eight days late, once 37 days) and effectively stopped paying many employees and contractors in July; three of the company’s roughly 26 staffers have been on strike since October. CEO Jesse Lyu told the outlet the company moved to “cash conservative mode” after plans to ship in India were derailed by regulatory issues, but says a legally binding funding term is signed and new financing should close “in the coming weeks.” He’s also been promoting RabbitOS 2.0 and a 2026 timeline for next‑gen hardware. The situation highlights wider risks in the AI‑hardware startup space: high upfront manufacturing/design costs (Rabbit partnered with Teenage Engineering), fragile cashflows, regulatory and market‑entry fragility, and the tough sell of dedicated AI wearables when smartphones already offer many AI services. For the AI/ML community this matters because stalled companies erode developer and consumer confidence, slow software/hardware iteration (Rabbit’s ongoing software fixes were meant to redeem an initially “half‑baked” R1), and may dampen investor appetite for niche AI devices despite ongoing product innovation.