Elon Musk admits xAI needs total rebuild as 9 of 11 co-founders exit amid internal chaos

Staff complain that xAI is flailing because of constant upheaval

Elon Musk has ordered another round of job cuts at xAI after growing frustrated with the poor performance of its coding product, forcing out several more cofounders and parachuting in "fixers" from SpaceX and Tesla to audit the startup. The latest overhaul of the 2-year-old startup follows the success of Anthropic and OpenAI, whose AI coding tools have shaken up the software industry, multiple people familiar with the decisions said. Musk has dialled up the pressure after merging SpaceX with xAI in a $1.25 billion deal, as he attempts to meet a June deadline for what could be the biggest stock market listing in history. The world's richest man has said his goals are to launch AI data centers into space, build factories on the Moon, and colonize Mars. Musk has relentlessly pushed the heavily loss-making AI startup to catch up with rivals, but so far its Grok chatbot and coding product have failed to gain traction with paying individual users or businesses. "xAI was not built right first time around, so is being rebuilt from the foundations up," Musk posted on X on Thursday. "Same thing happened with Tesla." SpaceX and Musk did not immediately reply to requests for comment. Managers from SpaceX and Tesla have been seconded to review xAI employees' work and have fired some after deeming their efforts inadequate, said two people with direct knowledge of the matter. One area of focus has been the quality of the data used to train the models, a key reason its coding product lagged behind Anthropic's Claude Code or OpenAI's Codex. The review has pushed out two more cofounders. Zihang Dai, one of the most senior members of the technical staff, who had publicly acknowledged that xAI was behind on coding, departed this week. Guodong Zhang, who had run pre-training of Grok models, told colleagues that he was leaving after being blamed for the issues with the coding product and relieved of his primary duties by Musk, two people familiar with the decision said. He confirmed that Thursday was his last day in a post on X. After the departures, only Manuel Kroiss -- known as "Makro" -- and Ross Nordeen will remain of the 11 cofounders who helped Musk set up xAI in San Francisco in March 2023. Last month, Musk criticized the coding team for falling behind in a town hall meeting that was posted online. He detailed a reorganization after several other co-founders had been removed, including Greg Yang, Tony Wu, and Jimmy Ba. Toby Pohlen, a former DeepMind researcher, was put in charge of the "Macrohard" project to build digital agents that Musk said could replicate entire software companies. Musk said it was the "most important" drive at the company. The name is a "funny" reference to Microsoft, the billionaire added. Pohlen left 16 days later. Musk has redeployed Ashok Elluswamy, head of AI software at Tesla, to reboot the Macrohard effort and review the work done previously. Musk said that Tesla and xAI would work together to develop a "digital Optimus" that would combine the car and robot maker's real-world AI expertise and Grok's large language models. Staff complain that the constant upheaval is destroying morale and preventing xAI from achieving its potential. Musk has built a vast data center in Memphis, Tennessee, with more than 200,000 specialized AI chips, which he plans to expand to 1 million GPUs over time. It also benefits from the data fed in by his social media network X, which was merged with xAI last year and now promotes the Grok chatbot. Employees were sent a memo denying that there would be mass layoffs on Wednesday, the people said. However, researchers continue to quit because of burnout from Musk's "extremely hardcore" work demands or after receiving better offers from rivals, multiple people familiar with the departures said. The layoffs and departures have left xAI with many roles to fill. Recruiters have been contacting unsuccessful candidates from previous interviews and assessments to offer them jobs, often on better financial terms, the people said. "Many talented people over the past few years were declined an offer or even an interview at xAI. My apologies," Musk posted on Friday morning. He said he would be "going through the company interview history and reaching back out to promising candidates." Musk still has the ability to recruit top Silicon Valley talent. This week, xAI poached two staff from popular AI coding app Cursor -- Andrew Milich and Jason Ginsberg -- to help improve the "Grok Code Fast" product. Musk welcomed them in a post on Thursday, adding: "Orbital space centers and mass drivers on the Moon will be incredible."

'Not built right the first time' -- Musk's xAI is starting over again, again | TechCrunch

And then there were two: Of the original eleven cofounders who kickstarted xAI with Elon Musk three years ago, only a pair remains as the deep learning lab continues a personnel overhaul to compete with Anthropic and OpenAI. That rebuilding, insists Musk, is by design. "xAI was not built right first time around, so is being rebuilt from the foundations up," Musk said Thursday on his social media platform, X. By most measures, it isn't going all that smoothly. The most immediate pressure is competitive. This week, xAI cofounders Zihang Dai and Guodong Zhang left the outfit after Musk complained that the company's AI coding tools were not effectively competing with Claude Code or Codex, rival programming assistants made by Anthropic and OpenAI, respectively. Musk said the company held an all-hands meeting on Wednesday that focused on how to catch up, which he predicted would be possible by the middle of this year. Coding tools matter so much because they're where the money is. While an early-year surge of users was powered by xAI's lax regulation of Grok's ability to produce sexual and even abusive imagery, coding tools are seen as the key revenue-generating tech for AI labs. That makes xAI's current lag in this area more than an perception issue; it's a business problem. The personnel overhaul extends well beyond this week. A month ago, 11 senior engineers at xAI, including two co-founders, left the company following changes Musk described as a reorganization to suit a larger business. That effort was apparently insufficient: The Financial Times reported that SpaceX and Tesla executives have parachuted into the company to evaluate employees and fire those who don't make the grade. The two remaining co-founders, Manuel Kroiss and Ross Nordeen, along with Musk, have their work cut out for them. Musk is now casting a wider net for talent. On Thursday, he said on X that he and another colleage, Baris Akis, are currently reviewing rejected employment applications in the company, with an eye toward reaching out to promising candidates who should have had a chance to interview. "My apologies," Musk added, addressing the pile of strangers he'd ghosted. For the sake of comparison, LinkedIn reports that xAI has just over 5,000 employees, compared to more than 7,500 at OpenAI and more than 4,700 at Anthropic. On the hiring front, there's at least one encouraging sign. Andrew Milich and Jason Ginsberg are joining xAI from the AI coding tool company Cursor, where the two held joint responsibility for product engineering. Unlike xAI, Cursor depends on frontier labs for access to the AI models it runs on. Their decision to join xAI may signal the importance of direct access to LLM and computing resources to run them -- and suggest that xAI's core asset, its own frontier model, is still an attractive draw. Either way, the pressure to show results is as much external as it is internal. Now that xAI is part of SpaceX, and with a public offering of SpaceX shares anticipated, the cash-burning unit is under pressure to demonstrate real uptake on Grok, its LLM. (A stumbling AI division is not the story Musk needs investors to be reading.) Longer term, Musk is betting on something bigger than coding tools. xAI's Macrohard project -- Musk is convinced the name is "a funny reference to Microsoft" -- aims to create an AI agent capable of doing anything a white collar worker can do on a computer. Toby Pohlen, chosen to lead the project in February, left within weeks, and this week, Business Insider reported that Macrohard was on pause. Musk's response has been to draft another of his companies into the project. He revealed for the first time that Macohard is a joint effort with Tesla, which is also developing a complementary agent dubbed "Digital Optimus" -- a reference to Tesla's Optimus humanoid robot. In Musk's description, the xAI language model would direct the Tesla agent as it performs tasks. It's ambitious; it's also not unique. Instead, the vision is not far off from what Perplexity - an AI-powered search engine -- is doing with its new "Everything is Computer" offering, which aims to offer enterprise users a dedicated "digital proxy" that can orchestrate their digital tasks. It also echoes what entrepreneur Peter Steinberger is now working on at OpenAI, after creating OpenClaw's popular personal agents.

Grok, Is This True? Musk Says xAI Needs to Be 'Rebuilt' As Co-Founders Flee

Elon Musk's xAI launched in 2023 with ambitions to take on OpenAI. But he now appears to be hitting the reset button on the startup. On Thursday, Musk tweeted, "xAI was not built right first time around, so is being rebuilt from the foundations up. Same thing happened with Tesla," which he took over from its original founders. It's not a great sign for xAI, which has lost most of its original co-founders, including Guodong Zhang, who announced his departure yesterday. Business Insider reports that only two people of the original 11-member co-founding team are left, in addition to Musk. Perhaps to fill the void, two engineering leaders at AI coding provider Cursor announced they are joining xAI. The rebuild comes after xAI was absorbed into SpaceX, which has grand ambitions to operate a network of orbiting data centers spanning up to 1 million satellites. To fund the project, SpaceX is preparing an IPO expected to generate tens of billions, which could be funneled into xAI. Musk's xAI, which technically owns and oversees X/Twitter, is perhaps best known for the Grok chatbot. But the startup faces major competition from OpenAI, Anthropic, and Google. It's also stumbled into big controversies, like when it generated sexualized images of women and minors. At the same time, xAI has reportedly been burning about $1 billion in cash per month, raising concerns that it'll eventually run out of money as it builds new AI data centers. Last year, Musk also announced an ambitious effort to take on Microsoft through a project called "Macrohard," which focused on creating AI agents capable of developing high-quality software. But it appears that is facing changes as well. On Wednesday, Musk indicated that Macrohard was merging with Tesla's efforts to develop the software for the upcoming Optimus robot. "Macrohard or Digital Optimus is a joint xAI-Tesla project, coming as part of Tesla's investment agreement with xAI," he tweeted. The idea is to use xAI's Grok as navigation software to help control the still-in-development Optimus bots. "You can think of it as Digital Optimus AI being System 1 (instinctive part of the mind) and Grok being System 2. (thinking part of the mind)," Musk wrote, later adding: "In principle, it is capable of emulating the function of entire companies. That is why the program is called MACROHARD, a funny reference to Microsoft."

Musk Pledges to Rebuild xAI as Another Co-Founder Departs

Elon Musk said he intends to rebuild his artificial intelligence startup, xAI, after a series of departures sparked uncertainty about the company's employee turnover and trajectory. "xAI was not built right first time around, so is being rebuilt from the foundations up," Musk said in a post on his X social media platform Thursday. The announcement coincides with more high-profile exits from xAI following its merger last month with Musk's SpaceX. Guodong Zhang, an xAI co-founder who oversaw its image generation product, announced Thursday that he has departed the company. Haotian Liu, who worked closely with Zhang, has also left xAI, citing burnout. Another founding member, Zihang Dai, is also no longer at the company, according to a Business Insider. Dai and xAI did not respond to requests for comment. The rapid exits mean that no more than three of the 12 original xAI co-founders, including Musk, are left at the three-year-old company. On Thursday, Musk hired two senior employees from Cursor, a leading AI coding startup that is currently in fundraising discussions at a $50 billion valuation. Musk admitted at a conference earlier this week that xAI is behind on coding, a key focus for rivals like OpenAI and Anthropic PBC. Musk has been working on the hiring push with Baris Akis, a close ally who's leading talent recruitment at xAI. "Many talented people over the past few years were declined an offer or even an interview at xAI. My apologies," Musk posted on X. "Baris and I are going through the company interview history and reaching back out to promising candidates."

Musk ousts more xAI founders as AI coding effort falters, FT reports

March 13 (Reuters) - Elon Musk has triggered a fresh wave of job cuts at his AI firm xAI, with more co-founders pushed out amid his dissatisfaction with the underperformance of the startup's coding division, the Financial Times reported on Friday. Musk last month overhauled the management of xAI, ahead of a planned initial public offering that could rank among the largest ever, after merging the company with his rocket firm SpaceX. He bought in "fixers" from SpaceX and Tesla (TSLA.O), opens new tab to audit xAI, who let go of several employees whose work was deemed inadequate, according to ⁠FT. Co-founder Guodong Zhang, head of xAI's Imagine team, told colleagues he was leaving after being blamed for issues with the coding product and relieved of his primary duties by Musk, the report said, citing two people familiar with the decision. He confirmed his departure in a post on X on Thursday. Zihang Dai, another co-founder, reportedly left xAI earlier this week. The exits leave the three-year-old AI company with only two of its 12 co-founders who helped Musk set up xAI in March 2023, according to the ⁠report. SpaceX, which purchased xAI to create a $1.25 trillion company, did not immediately respond to a Reuters request for comment. XAI staff have complained that the upheaval is damaging morale and standing in the way of it reaching full potential, the FT report said. Researchers continue to leave ⁠because of burnout because of Musk's "extremely hardcore" work demands or after receiving better offers from rivals. Recruiters have been contacting candidates who had previously been rejected to extend job offers, often with ⁠improved financial terms, the report said. "Many talented people over the past few years were declined an offer or even an interview at xAI. My apologies," Musk said ⁠in an X post on Friday, adding that he will reach back out to promising candidates. xAI bought in Andrew Milich and Jason Ginsberg from code-generation startup Cursor on Thursday. Reporting by Juby Babu in Mexico City; Editing by Arun Koyyur Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Artificial Intelligence * ADAS, AV & Safety * Software-Defined Vehicle * Sustainable & EV Supply Chain

Elon Musk says xAI must be 'rebuilt' as co-founder exodus continues, SpaceX IPO awaits

Less than six weeks after Elon Musk merged SpaceX and xAI in a deal he valued at $1.25 trillion, the world's richest person is acknowledging that his artificial intelligence startup "was not built right first time around, so is being rebuilt from the foundations up." Musk took to X, which is now owned by SpaceX, to make the comment after a number of xAI's co-founders recently hit the exits. The most recent came this week, when Zihang Dai and Guodong Zhang reportedly left the company. Last month, influential researcher Jimmy Ba announced his departure in a post on X, thanking Musk and writing that he was, "Grateful to have helped cofound at the start." That came after Tony Wu said he was leaving. Toby Pohlen followed them out the door later in February. The xAI exodus, which leaves Musk with only a pair of people who started the company with him in 2023, comes as SpaceX prepares to go public sometime this year in what will likely be a record IPO, should it take place. In merging SpaceX with xAI last month, the reusable rocket company was valued at $1 trillion and the AI part of the business was tagged at $250 billion, according to documents viewed by CNBC. Musk previously used xAI to acquire his social network X, formerly Twitter, in another all-stock transaction announced last March. On Thursday, SpaceX said it hired two programmers from red-hot AI coding startup Cursor, Andrew Milich and Jason Ginsberg. The Financial Times reported on Friday, citing people familiar with the matter, that Musk has ordered a round of job cuts after seeing the rapid success of coding tools from generative AI rivals OpenAI and Anthropic.

Elon Musk is tearing xAI down to build it back up. Again.

The AI company he founded three years ago has lost six co-founders, is slashing staff, and trails badly in coding benchmarks. Musk's remedy: rebuild from scratch, for the second time. In March 2023, Elon Musk launched xAI with 12 co-founders and a stated ambition to build "the most powerful AI in the world." Three years later, 10 of those founders have gone. The company is cutting staff. Its flagship chatbot Grok is acknowledged, by Musk himself, to lag behind its main competitors. And for at least the second time, Musk has declared that xAI must be rebuilt from the foundations. "It was not built right first time around, so is being rebuilt from the foundations up," Musk said this week, less than six weeks after completing a $1.25 trillion merger between xAI and SpaceX. The comment came as reporting from the Financial Times and CNBC confirmed a wave of departures among xAI's senior engineering staff, with Tesla and SpaceX executives reportedly sent in to audit teams and identify underperformers. The most recent exits, researcher Zihang Dai and engineer Guodong Zhang, follow the February departure of Jimmy Ba, one of the company's highest-profile AI researchers. The cumulative loss, described by insiders as a combination of burnout and Musk's management style, has left morale at the company in poor shape, according to multiple people familiar with the situation. The immediate catalyst for this latest round of disruption appears to be Grok's performance on coding tasks. Musk said at a conference this week that "Grok is currently behind in coding", a candid admission given that AI-assisted software development has emerged as perhaps the most commercially valuable near-term application of large language models. Grok trails Anthropic's Claude Code and OpenAI's Codex in coding benchmarks, according to xAI staffers cited in FT reporting. The gap has become a source of internal frustration: engineers who joined xAI expecting to be at the frontier instead find themselves chasing a moving target set by competitors with more data, more investment, and fewer departures. In an attempt to close the gap, xAI announced hires from Cursor, the AI-powered coding environment that has built a devoted following among developers. Whether transplanting talent from one company to another can resolve what appear to be deeper structural and cultural problems at xAI is, at minimum, unclear. The timing is delicate. The SpaceX-xAI merger, valued at $1.25 trillion, was framed in part as a way to stabilise xAI's ambitions by giving it access to SpaceX's capital, compute infrastructure, and engineering discipline. Tesla also invested $2 billion in xAI earlier this year. Both investments now look more complicated against the backdrop of an acknowledged rebuild and a continuing talent crisis. xAI has also been under regulatory scrutiny in multiple countries after its Grok image generator was found to produce non-consensual intimate imagery with minimal safeguards. The company has addressed some of those concerns, but the reputational damage has complicated its pitch to enterprise customers who might otherwise have been considering Grok as an alternative to OpenAI or Anthropic products. Musk's companies have been rebuilt before. Tesla was months from insolvency when it launched the Model 3. SpaceX famously had three rocket failures before its fourth mission succeeded. Whether the pattern holds for an AI lab in an era where the competitive landscape shifts every few months is the question hanging over xAI's third act.

Elon Musk Is Dipping Into the Rejected Candidates Pile After Admitting xAI 'Was Not Built Right'

Just a few weeks after using his company SpaceX to acquire his AI company xAI, Elon Musk admitted that the latter "was not built right." That's exactly what people want to hear while you're pitching possibly the largest initial public offering ever. On X (another company he owns), Musk said that he was in the process of rebuilding xAI, the company responsible for Grok, "from the foundations up." The thing is, there's not much of the foundation left at this pointâ€"and it's not because Musk has been cleaning shop. Just 10 of 12 people who originally founded the company alongside Musk still remain, and it lost multiple founders in the last month alone following the merger with SpaceX. So it's less that Musk has stripped the place back down to the studs and more that he walked into the boardroom one day and found it empty. Regardless, the CEO says the company is building back up, and it's taking a second look at people it previously passed over. "Many talented people over the past few years were declined an offer or even an interview at xAI. My apologies," Musk wrote, before stating that he is "going through the company interview history and reaching back out to promising candidates." Whether that's truly a recognition of having the wrong hiring processes or a tacit admission that you've burned through your first choices and are now pleading with the backup options is up for interpretation. Either way, xAI will have to work on its talent retention with this new crop of hires, because the company has a real habit of burning through people. Developer Benjamin De Kraker recently recounted his experience at the company, which he was initially excited about joining but said he left feeling "sad." Per De Kraker's account, Musk's bluster about xAI having a "flat structure" where anyone can contribute was little more than a marketing pitch. Inside the company, he claimed to have been stifled by "middle managers and busybodies." He also said that after soliciting people on X for ideas on how Grok could be improved, he was told to delete the post, and his account on X was suspended. (Interesting that the punishment would reach across whatever boundaries may exist between Musk-run entities.) De Kraker also went out of his way to respond to a post asking if the way xAI was run ultimately led to founders quitting. "It was not random," he replied. Given Musk's managerial style and his need to put his finger on the scale with Grok to make sure it's not "woke," it doesn't seem like the working environment is going to improve at xAI, no matter who he brings in, as long as he's still in charge. But hey, at least he can just keep moving money around between his companies to keep it afloat.

Elon Musk admits xAI 'wasn't built right' as only 2 co-founders remain and its biggest AI bet stalls out | Fortune

Elon Musk said he is rebuilding xAI from the ground up just a month after SpaceX acquired his AI startup in one of the biggest mergers of all time. Following a gradual exodus from xAI, the world's richest man is trying to reimagine the company with heightened ambitions. The Tesla and SpaceX CEO added in a post on X last week that xAI was undergoing a process similar to an earlier one at Tesla, which Musk has been CEO of since 2008. "xAI was not built right first time around, so is being rebuilt from the foundations up," he wrote in the post. Musk said the purpose of the SpaceX acquisition is building "orbital data centers," which he has said are the most cost-effective way of producing AI computing power. Yet here on Earth, Musk is dealing with a seemingly less lofty, but all-too-important, staffing issue. A pair of xAI cofounders left the company last week and two others bailed last month, Business Insider reported, meaning nine of the original 11 cofounders not named Musk have left the company since 2024. These most recent departures come after an exodus of about a dozen senior engineers. The precipitous loss of talent has stalled the company's biggest AI bet. "Macrohard," its effort to build an AI agent capable of doing anything a white collar worker can do, has reportedly been put on "pause" in the past days as its leader, Toby Pohlen, left the company just weeks after being appointed to head the project. While all the exits raise questions about the company's future, Musk has downplayed the brain drain as part of a planned reorganization. Some employees are better suited for the early stage of a venture rather than the later stages, he said at an all-hands meeting last month, according to the New York Times. Representatives for xAI did not immediately respond to a request for comment. The xAI CEO is now looking to aggressively hire, albeit from an extremely limited pool of AI-focused workers. Already, the AI company has been able to poach two employees, Andrew Milich and Jason Ginsberg, from AI coding company Cursor, The Information reported. These hires are key because of the potential growth in the coding tools market, which stood at $7.65 billion as of 2025 and is projected to grow to $22.2 billion by 2030. Cursor itself was valued at $29.3 billion after raising $2.3 billion in a funding round in November. Despite this successful recruitment, Musk said he and a colleague are looking over rejected xAI applications to look for promising candidates. "Many talented people over the past few years were declined an offer or even an interview @xAI. My apologies," he wrote.

Elon Musk Orders Sweeping Layoffs as xAI Fails to Catch Up

In a Thursday tweet, Elon Musk said he was looking to rebuild his AI startup xAI "from the foundations up" after admitting it wasn't "built right first time around." The news comes amid a major exodus of cofounders, with a striking majority of them jumping ship over the last year. Amid the resulting leadership vacuum, the Financial Times reported on Friday that Musk had omitted a key detail in his latest missives on his social media platform. According to the paper's sources, he's ordered a round of sweeping layoffs at the company after becoming frustrated with a lack of progress on its AI coding software. Many roles are reportedly being scrutinized. Musk reportedly ordered higher-ups from Tesla and SpaceX, the latter of which xAI was folded into earlier this year, to conduct audits and weed out anybody deemed to be underperforming -- likely not what staffers, who were already complaining of burnout, wanted to hear. The news comes just over a month after Musk announced he had "reorganized" xAI, admitting that it "unfortunately required parting ways with some people." The pressure is on. Following SpaceX and xAI's merger, the space company is looking to go public at a staggering valuation of $1.25 trillion. But keeping up in the heated AI race is proving far more difficult than Musk may have anticipated, given his decision to rework the entire thing mere months ahead of the biggest stock market listing in history. Coding, in particular, has become a major focus, with Musk poaching two senior employees from AI coding startup Cursor. According to the FT, staffers have grown concerned that the training data of xAI's chatbot Grok was lacking, causing it to lag far behind Anthropic's popular Claude Code and OpenAI's Codex. "Grok is currently behind in coding," Musk said at a conference earlier this week, as quoted by Business Insider. "The reason I was late for this was that I was just in a giant sort of all-hands on coding, going through all the things that need to happen to essentially exceed our competitors on coding, which I think we'll do." Musk's messaging surrounding the company's AI product has been opaque. In August, the mercurial CEO announced the company's latest AI project, "Macrohard," a tongue-in-cheek jab squarely aimed at competitor Microsoft. Musk also said that he was combining Tesla and xAI's efforts to develop a "digital Optimus," a nod to the carmaker's humanoid robot. The man who was leading the "Macrohard" effort, former DeepMind researcher Toby Pohlen, left the company just 16 days after being put in charge of the project late last month. Where that leaves the future of xAI's coding tool remains to be seen. Apart from being pushed out by Musk, who's now trying to reboot the company from scratch, inside sources told the paper that people are quitting because they're burnt out, an unsurprising development given the CEO's infamously brutal micromanagement style. Insiders told the FT that the revolving door of talent was destroying morale. "My next priorities: sleep for more than 8h, write down all the things I've learnt (I have a list), and then think about what I want to do next," Pohlen wrote.

Musk admits xAI 'not built right' -- weeks after Tesla invested $2 billion

Elon Musk admitted today that xAI, his artificial intelligence venture, "was not built right first time around" and "is being rebuilt from the foundations up." The admission comes just six weeks after he had Tesla pour $2 billion of shareholder money into the company. The timing is remarkable. Tesla disclosed the $2 billion xAI investment in its Q4 2025 earnings report on January 28. Days later, SpaceX acquired xAI in a deal valuing the combined entity at $1.25 trillion. Now Musk is telling the world the thing he just sold to his own public and private investors was broken. The "not built right" admission didn't come out of nowhere. xAI has been hemorrhaging talent at an alarming rate. Of the 12 people who co-founded the company with Musk in 2023, only two -- Manuel Kroiss and Ross Nordeen -- remain. The departures accelerated dramatically in February 2026. Jimmy Ba, a University of Toronto professor whose research was critical to Grok's development, resigned amid reported tensions over demands to improve model performance. Tony Wu left the same week. Igor Babuschkin, Kyle Kosic, Christian Szegedy, Greg Yang, Zihang Dai, Guodong Zhang, and Toby Pohlen have all departed in rapid succession. At an all-hands meeting in February, Musk suggested the exits were deliberate, claiming that some people are "better suited for the early stages of a company and less suited for the later stages." But losing 10 of 12 co-founders isn't a natural evolution, it's a collapse of the founding team. Several of the departing engineers are reportedly starting a new venture together, which tells you everything about the internal dynamics at xAI. Here's what makes this especially concerning: every person who owns an S&P 500 index fund is now exposed to this mess. Tesla invested $2 billion in xAI's Series E round on January 16, acquiring preferred stock at a valuation of roughly $230 billion. When SpaceX acquired xAI weeks later, that $2 billion converted into a minority SpaceX stake. Tesla shareholders are already suing Musk for breach of fiduciary duty over xAI's founding, arguing he diverted AI talent and resources away from Tesla to benefit his private company. Musk admitting that xAI was fundamentally broken, weeks after extracting billions from Tesla and SpaceX to prop it up, adds a new layer to those legal challenges. Did SpaceX investors get full disclosure that xAI needed to be "rebuilt from the foundations up" before the $1.25 trillion mega-merger closed? Did Tesla's board understand what they were buying into? These are questions that regulators and shareholders will be asking. Musk has lost his entrepreneurial magic. For years, the bull case on anything Musk touched rested on a simple narrative: the man has a golden track record. PayPal, Tesla, SpaceX, a string of world-changing successes that justified premium valuations and extraordinary trust from investors. That narrative is crumbling. Twitter, now X, had lost roughly 70% of its value after Musk's $44 billion acquisition and before he proped it back up to $44 billion through his own self-dealing with the xAI merger. Tesla's Robotaxi rollout has been a disaster, with a single vehicle providing limited unsupervised drives in Austin almost a year into the program. "Full Self-Driving" remains a misnomer nearly a decade after Musk promised coast-to-coast autonomous driving "within a year." And now xAI, presented to investors as a frontier AI lab worth $250 billion, needs to be rebuilt from scratch. According to Arc AGI, xAI is significantly lagging behind Google, OpenAI and Anthropic in both performance and cost: Musk is not batting 1,000 anymore. He's running multiple companies simultaneously while serving on-and-off as a senior advisor in the Trump administration, and the quality of execution across his empire is suffering for it. You can't run Tesla, SpaceX, xAI, X, Neuralink, The Boring Company, and DOGE while maintaining the obsessive focus that made SpaceX and early Tesla successful. We've been covering the xAI-Tesla entanglement for months, and every new development makes the situation worse for Tesla shareholders. The sequence of events here is damning. Musk founded xAI despite Tesla's own AI efforts after selling part of his stake in the succesful automaker to finance his Twitter acquisition. He then convinced Tesla's board, which he effectively controls, to invest $2 billion of shareholder money into xAI. He had SpaceX acquire xAI at a $250 billion valuation, creating the largest merger in history. He announced a joint "Digital Optimus" project to justify the investment. And now, six weeks later, he admits the whole thing was built wrong and needs to start over. This isn't the Elon Musk who nearly went bankrupt to save both Tesla and SpaceX in 2008. That Musk was laser-focused on two companies and willing to stake everything on making them work. Today's Musk is spread across half a dozen ventures, distracted by political power, and using his publicly traded company as a piggy bank for his private ventures. The 10 co-founders who left xAI, many of them world-class AI researchers, clearly saw the problem before the rest of us did, and likely took a deal through the SpaceX merger. This self-dealing is completely unacceptable, especially when it involves siphoning billions from a publicly traded company that millions of people are indirectly invested in through index funds.

Elon Musk Admits xAI "Wasn't Built Right" -- and Is Rebuilding the Company From Scratch

Elon Musk says that xAI "wasn't built right the first time," and is now being "rebuilt from the foundations up." Musk made the comment in an X post, in reference to the news that two product and engineering leads at AI coding company Cursor, Jason Ginsberg and Andrew Milich, had joined xAI. According to The Information, the pair joined specifically to help the organization catch up to competitors Anthropic and OpenAI in coding. The admission from Musk comes just over a month after SpaceX acquired xAI in an all-stock deal that valued the AI company at $250 billion. It also follows a string of departures from xAI by employees and senior leaders, including most of the company's original 12 co-founders. Guodong Zhang, a co-founder who previously led efforts to improve Grok's coding abilities, posted on March 12 that it was his last day at the company. According to the Financial Times, Musk has recently brought in "fixers" from Tesla and SpaceX to audit xAI, and Zhang told colleagues that he was leaving after being relieved of his main duties by Musk. The FT also reported that another co-founder, Zihang Dai, also left the company earlier this week.

Musk ousts more xAI founders as AI coding effort falters, FT reports - The Economic Times

Elon Musk has triggered a fresh wave of job cuts at his AI firm xAI, with more cofounders pushed out amid his dissatisfaction with the underperformance of the startup's coding division, the Financial Times reported on Friday. Musk last month overhauled the management of xAI, ahead of a planned initial public offering that could rank among ⁠the largest ⁠ever, after merging the company with his rocket firm SpaceX. He bought in "fixers" from SpaceX and Tesla to audit xAI, who let go of several employees whose work was deemed inadequate, according to FT. Cofounder Guodong Zhang, head of xAI's Imagine team, told colleagues he was leaving after being blamed for issues with the coding product and relieved of his primary duties by Musk, ⁠the report said, citing two people familiar with the decision. He confirmed his departure in a post on X on Thursday. Zihang Dai, another cofounder, reportedly left ⁠xAI earlier this week. The exits leave the three-year-old AI company with only two of its 12 co-founders who helped Musk set up xAI in March 2023, according to the report. SpaceX, which purchased xAI to create a $1.25 trillion company, did not immediately respond to a Reuters request for comment. XAI staff have complained that the upheaval is damaging morale and standing in the way of it reaching full potential, the FT report said. Researchers continue to leave because of burnout because of Musk's "extremely hardcore" work demands or after receiving better offers from rivals. Recruiters ⁠have been contacting candidates who had previously been rejected to extend job offers, often with improved financial terms, the report said. "Many talented people over the past few years were declined an offer or even an interview at xAI. My apologies," Musk said in an X post on Friday, adding that he will reach back out to promising candidates. xAI bought in Andrew Milich and Jason Ginsberg from code-generation startup Cursor on Thursday.

Elon Musk Admits xAI Passing On Promising Candidates -- Launches New Hiring Review

Artificial intelligence startup xAI is undergoing a major reset after problems in its early hiring process, Elon Musk said. "Many talented people over the past few years were declined an offer or even an interview at xAI. My apologies," Musk wrote on X last week. "Baris Akis and I are going through the company interview history and reaching back out to promising candidates." Akis, a talent strategist who has recruited engineers across several of Musk's companies, is helping lead the hiring review. Several members of the original team at xAI have already left as the company restructures and reassesses its hiring process. Don't Miss: Why The Hiring Reset Matters Musk's comments highlight how aggressively AI companies are competing for talent. Engineers and researchers with experience building large AI systems remain in short supply as companies race to develop new models and infrastructure. Revisiting past hiring decisions may help the company recover candidates who were overlooked during the startup's early recruiting push. As companies race to refine their AI capabilities, startups like Rad AI are focused on using data-driven intelligence to help organizations create more effective, measurable content -- highlighting how competition in the space is pushing both hiring and product development to evolve quickly. Trending: Skip the Regrets: The Essential Retirement Tips Experts Wish Everyone Knew Earlier. Signs Of A Broader Rebuild The restructuring appears to extend beyond hiring. Musk last week suggested the company is undergoing a deeper rebuild, writing that "xAI was not built right first time around, so is being rebuilt from the foundations up. Same thing happened with Tesla." Former xAI engineer Sulaiman Ghori has said the company is overhauling parts of its technical infrastructure. "The company is rebuilding its core production APIs," he said on "The Relentless" podcast in January, adding that "xAI is working far ahead." See Also: Don't risk buyer's remorse -- ask these critical questions every homebuyer should know. Where xAI May Be Headed Musk launched xAI in 2023 to compete with leading AI firms developing large language models and AI infrastructure. The company's Grok models represent its primary effort to challenge systems from OpenAI and Anthropic. Despite early setbacks in structure and talent acquisition, the ongoing rebuild includes hiring corrections, leadership additions from high-impact AI projects, and technical infrastructure overhauls that could help xAI accelerate progress. Musk told employees during an all-hands meeting that the company expects to catch up to rivals in key areas such as coding by mid-2026 before pulling ahead in the years that follow, TechCrunch reported. Read Next: Thinking about ETFs? See what investment risks you should be aware of before you buy. Image: Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Musk pushes out more xAI co-founders amid coding division struggles By Investing.com

Investing.com -- Elon Musk has initiated another round of job cuts at his artificial intelligence company xAI, with additional co-founders departing as Musk expressed dissatisfaction with the startup's coding division performance, the Financial Times reported on Friday. Last month, Musk restructured xAI's management ahead of a planned initial public offering that could be among the largest on record. The management overhaul came after Musk merged xAI with his rocket company SpaceX. Musk brought in personnel from SpaceX and Tesla to conduct audits at xAI. These auditors terminated several employees whose work was considered inadequate, according to the Financial Times. Co-founder Guodong Zhang, who led xAI's Imagine team, informed colleagues he was departing after Musk blamed him for problems with the coding product and removed him from his main responsibilities, the report said, citing two people familiar with the decision. Zhang confirmed his exit in a post on X on Thursday. Zihang Dai, another co-founder, left xAI earlier this week, according to the report. The departures leave the three-year-old artificial intelligence company with only two of its 12 original co-founders who helped Musk establish xAI in March 2023. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

xAI in Internal Crisis: Elon Musk Suggests a Complete Rebuild

Elon Musk's artificial intelligence start-up is weathering a period of turbulence marked by the departure of co-founders and controversies surrounding its Grok chatbot. The entrepreneur acknowledges that the company must be deeply reorganized. Less than six weeks after the merger between SpaceX and xAI in a deal worth $1.25 trillion, Elon Musk admitted that the artificial intelligence start-up needed to be "rebuilt from the ground up." He announced this via the social network X following a series of departures among the company's co-founders, notably Zihang Dai and Guodong Zhang. These exits follow those of Jimmy Ba, Tony Wu, and Toby Pohlen in recent months. Out of the founding members present at the creation of xAI in 2023, only two now remain alongside Musk. This instability comes as SpaceX prepares for a potentially historic IPO. In the recently announced merger, SpaceX was valued at $1 trillion and xAI at $250bn. Meanwhile, the company is recruiting new engineers, including Andrew Milich and Jason Ginsberg from the start-up Cursor, while simultaneously cutting positions after observing the rapid progress of programming tools developed by OpenAI and Anthropic. Elon Musk also acknowledged that some talented candidates had been overlooked during recruitment and said that he is reviewing old applications to re-establish contact with them. xAI is also facing several controversies related to its chatbot and image generator Grok, which has been accused of allowing the creation of non-consensual sexual images from real photos. Despite these controversies, the company has secured contracts with US government agencies and continues its investments in energy and data infrastructure, particularly around Memphis. Tesla is collaborating closely with xAI by integrating Grok into its vehicles and providing energy storage systems designed to power the company's data centers.