Elon Musk Rebuilding xAI Amid High Employee Turnover, Founder Departures

Elon Musk’s artificial intelligence company xAI is being “rebuilt from the foundations up,” with major job cuts expected across the board.

There has been growing frustration inside the company over its poor performance in coding tasks compared to Anthropic’s Claude Code and OpenAI’s Codex. Its chatbot Grok has also failed to catch on with users in the same way as ChatGPT and Google Gemini.

The poor performance was reportedly raised by Musk at a recent town hall meeting, leading to the resignation of two more co-founders, Zihang Dai and Guodong Zhang. According to the Financial Times, Zhang told colleagues he was leaving after being blamed for the poor performance of the coding product.

This brings the total number of co-founders to have left the two-year-old startup to nine, with only two remaining. Greg Yang, Tony Wu, and Jimmy Ba left a month ago during the Grok image deepfake controversy, which prompted lawmakers in several countries to call for changes to the chatbot.

There has been high turnover at xAI over the past 12 months, driven by extremely heavy workloads, a requirement to be in the office, and highly lucrative offers from rivals. Morale has also dipped amid controversies surrounding Grok. Beyond the deepfake issues, Musk has also been accused of asking engineers to manipulate results to align with his personal political positions.

Bringing in assistance from Tesla, SpaceX

Musk has brought in executives from his other companies to fill gaps left by the co-founder and other key talent departures. Ashok Elluswamy, head of AI software at Tesla, was moved to reboot the company’s AI agent project, called Macrohard.

There may also be further integration between Tesla and xAI in the robotics space. Musk has said the company could achieve artificial general intelligence (AGI) through Tesla’s Optimus robot.

Some investors have balked at Tesla being used to prop up xAI’s mission, as talent from the automaker is regularly being reshuffled into the AI startup. Tesla has also invested $2 billion into xAI.

Embedding xAI into SpaceX

This latest drive to rebuild xAI comes a few weeks after Musk reportedly laid plans to merge SpaceX and xAI into a single unit that may go public before the end of the year. The aggressive timeline has pushed Musk to frame the merged group as a complementary single organisation rather than two separate companies.

The main synergy highlighted by Musk so far is data centres in space. SpaceX could theoretically launch these facilities at a much lower cost than other AI companies, and the centres could operate in a colder environment while drawing large amounts of renewable energy from the sun. 

That said, most experts do not believe the technology is anywhere near ready, and estimate it could cost more than ten times as much as building a data centre on land.

Also read: Musk’s push to tie xAI more closely to SpaceX is already reshaping his broader AI strategy.

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