The cofounder shakeup at xAI is vintage Elon Musk

• Elon Musk is following a familiar Tesla-era playbook for his rebuilding plans at xAI.
• The stakes are higher now, with a highly competitive AI environment and a looming SpaceX IPO.
• XAI's cofounder exodus raises red flags at a pivotal moment in the company's history, experts said.

Ross Nordeen didn't announce he was leaving xAI. He didn't need to.

The 36-year-old engineer was abruptly cut off from the company systems last week and disappeared from a sprawling group chat with CEO Elon Musk and hundreds of other engineers. Later, he posted a photo of a hiking trail with the caption: "Touching some grass."

Nordeen, one of the billionaire's closest deputies, was the final non-Musk cofounder to depart the startup, and the eighth to exit in under three months. It's an unusually rapid unraveling of a founding team at a critical point in the company's history.

As SpaceX, which merged with xAI in February, races toward a blockbuster IPO, the shake-up has become something of a spectacle. It raises questions about the billionaire's motivations, the company's standing among competitors like OpenAI and Anthropic, and whether rebuilding is simply an iteration of Musk's playbook — or points to deeper issues inside the company.

"Anytime you see mass departures of the founding leadership team, that is a negative signal," Charles Elson, a corporate governance expert, told Business Insider.

"If things were bright and rosy for the future, why would you leave? Either you're leaving because you're cashing out, which suggests that you think the thing is overpriced or richly priced, or you're leaving because you don't have faith in the management of the organization going forward."

"Either way, it doesn't look good," he added.

Franco Granda, a senior research analyst at Pitchbook, told Business Insider that companies are under increased scrutiny in the months leading up to an IPO. While the rocket ship business will be the core focus of SpaceX's stock market debut, the merger with xAI and exodus of cofounders created a "lot of distractions."

"When you integrate xAI, which is a bleeding, hemorrhaging business at this point, I think it creates a lot of risks," he said, pointing to reports of the startup burning through billions of dollars.

'I thought he'd go down with the ship'

Unlike some of the 10 cofounders who left before him, Nordeen's split was a surprise to some company insiders and close observers of Musk's empire.

He joined xAI in 2023 from Tesla, where he was a technical program manager on the Autopilot team. He's a longtime friend of Musk's cousin, James Musk, and was one of the "three musketeers" who assisted in Musk's 2022 Twitter takeover, according to Walter Isaacson's biography of the billionaire.

One former colleague described Nordeen as "Musk's handler" and said, "I thought he'd go down with the ship."

Musk has said he's rebuilding that ship. In one social media post, he said xAI "was not built right first time around" and compared the turbulence to his retooling of Tesla nearly a decade ago.

In 2008, Musk ousted cofounder and former CEO Martin Eberhard, who was followed out the door by cofounder Marc Tarpenning. Tesla went through two more CEOs before Musk took over and built a fledgling startup with a few dozen employees into the most valuable car company in the world.

That turnaround magic could be difficult to replicate at xAI. Unlike Tesla, which had few EV competitors, the AI startup is operating in a highly saturated market. Though it's valued at around $250 billion, it lags behind OpenAI and Anthropic when it comes to visibility, consumer use, and scale.

Behind closed doors, Musk has expressed frustration with the progress on Grok Imagine, the company's image and video generation tool, and Macrohard, insiders previously told Business Insider.

Since February, xAI has cut dozens of employees across the Grok Imagine and Macrohard teams and brought in Tesla and SpaceX engineers to help run the company. The Macrohard project, which saw several leads exit, stalled and has since become a joint project with Tesla, Business Insider previously reported.

In January, cofounder Greg Yang stepped down, while cofounders Tony Wu and Jimmy Ba — whose roles were narrowed — left the following month. Then came Toby Pohlen, who led xAI's computer use team; Zihang Dai, who worked on Grok Code; and Guodong Zhang, who led Grok Code and Grok Imagine. Manuel Kroiss, who also worked on the coding initiative, left in March.

Even if the cofounders were fired, as Musk appeared to suggest in a post on X, Elson, the corporate strategy expert, said the potential for him to consolidate power doesn't offset the loss of talent.

"The basis of the firm is not equipment or a patent. It's the intellectual capital of those who put it together," Elson said.

In the world of AI, talent is one of the most precious assets, prompting fierce poaching battles and astronomical salaries paid to top recruits at some of the biggest players in the industry.

"Companies go to great lengths to recruit that talent and keep those people, " Paul Nary, a mergers and acquisitions expert at the University of Pennsylvania, told Business Insider.

"The AI talent at the top of xAI is probably the most valuable part of xAI," he said.

The Musk playbook

SpaceX confidentially filed for an IPO with the Securities and Exchange Commission on Wednesday, according to several news outlets, and could reportedly seek a valuation of $1.5 trillion or higher.

It's poised to be the biggest ever IPO and beat Musk's AI rivals to the stock market.

It's not the first time Musk has taken a company public while under pressure. When he helped take Tesla public in 2010, the EV maker was cash-strapped, and Musk was focused on keeping the company afloat and getting its first mass-market vehicle on the road.

An engineer who worked at Tesla during that period said executive shuffling was common then. Musk stopped by people's desks on a weekly basis and asked engineers to explain their work, they said.

"If he thought you were full of shit, you were out," they said.

They recalled flying out to celebrate the IPO, watching Musk pop a bottle of champagne, and flying back to Hawthorne, California, and working later that night.

The IPO "was almost seen as a distraction," they said.

Executive turnover has remained a theme at Musk's companies, even among acolytes like Omead Afshar and Raj Jegannathan. Now, at xAI, the exodus of cofounders has become a distraction from the SpaceX IPO.

"A lot of people are probably looking at this and saying, 'He's known to do things like this and things still work,'" Pitchbook's Granda said. "But with AI as it stands, I don't know if you could afford to do things like that."

"Clearly they're trying to get their act together ahead of the IPO, but when you have everyone leave, and you have such limited talent, it's going to be a really tough task."

Nary, the M&A expert, said the cofounders' departures ahead of the IPO are far from conventional; typically, companies take steps to prevent top talent from leaving ahead of an IPO. Then again, he noted, Musk himself is an outlier who has been known to surprise skeptics.

"That's a defining feature — the same rules don't always apply to a Musk company," he said.

Do you work at xAI or have a tip? Contact this reporter via email at gkay@businessinsider.com or Signal at 248-894-6012. Use a personal email address, a nonwork device, and nonwork WiFi; here's our guide to sharing information securely.