There could be multiple reasons why sky launch is failing to connect to the launched AWS EC2 instance. One possible reason is that there is an issue with the SSH connection. Another reason could be that there is a problem with the security group configuration. It is also possible that there is an issue with the Skypilot version being used. Upgrading to the latest version may resolve the issue. Additionally, there could be a problem with the AWS account permissions. Checking and ensuring that all necessary permissions are set up for the AWS account is recommended. Finally, it is worth noting that cleaning up any dangling resources and reattempting the launch may help resolve the issue.