Elon Musk is shaking things up at his artificial intelligence startup, xAI. Frustrated by the slow progress and poor performance of its AI coding products, Musk has ordered a fresh wave of job cuts and management changes. To get the company back on track, he has brought in trusted managers from his other ventures, SpaceX and Tesla, to audit operations and fix ongoing issues.
This massive overhaul comes as the two-year-old startup struggles to compete with industry giants like OpenAI and Anthropic. While competitors’ AI coding tools are transforming the software world, xAI’s Grok chatbot and its coding tools have had a hard time winning over individual users and businesses.
Tesla and SpaceX Executives Take Charge
To address the quality issues, managers from Tesla and SpaceX have been brought in to review the work of xAI employees. Unfortunately, this audit has led to firings when work did not meet expectations.
A major focus of the review has been the poor quality of data used to train xAI’s models. This data issue is largely why their coding product has fallen behind rivals like OpenAI’s Codex and Anthropic’s Claude Code. Musk recently took to X (formerly Twitter) to explain the situation, stating, “xAI was not built right first time around, so is being rebuilt from the foundations up. Same thing happened with Tesla.”
Co-Founders Step Down Amid Intense Pressure
The intense work environment and constant restructuring have heavily impacted the company’s leadership. Two more key co-founders have recently left the startup:
- Zihang Dai: A senior technical staff member who openly admitted the company was lagging in the coding race.
- Guodong Zhang: The head of pre-training for Grok models, who stepped down after being blamed for product issues and relieved of his main duties.
With these departures, only two of the original 11 co-founders who helped launch xAI in March 2023 remain: Manuel Kroiss and Ross Nordeen.
Big Ambitions and the “Macrohard” Project
The pressure at xAI is higher than ever, especially following its $1.25 billion merger with SpaceX. Musk is pushing the heavily loss-making AI company to meet a strict June deadline for what could be the largest stock market listing in history. His ultimate goals remain incredibly ambitious, including launching AI data centers into space and building factories on the Moon.
As part of the turnaround strategy, Musk launched the “Macrohard” project—a playful jab at Microsoft. The goal is to build digital agents capable of replicating entire software companies. After the original project leader left just 16 days in, Musk reassigned Ashok Elluswamy, Tesla’s head of AI software, to lead the effort. The plan is to combine the real-world robotics expertise of Tesla with xAI’s language models to create a “digital Optimus.”
Rebuilding the Team Despite Low Morale
Current employees report that the constant changes are hurting morale and holding the company back from reaching its true potential. Despite a recent memo assuring staff that mass layoffs are not planned, many researchers continue to quit. The primary reasons for leaving include burnout from Musk’s “hardcore” work culture and better job offers from competitors.
To fill the empty roles, xAI is getting creative with its recruitment:
- Reaching Out to Past Candidates: Recruiters are contacting people who previously failed their interviews or assessments, often offering them better financial packages.
- Poaching Top Talent: xAI recently hired Andrew Milich and Jason Ginsberg from the popular AI coding app, Cursor, to help improve the “Grok Code Fast” product.
Despite the current struggles, Musk is backed by massive resources. He has built a massive data center in Memphis, Tennessee, equipped with over 200,000 specialized AI chips, with plans to expand to 1 million GPUs. With this hardware and the constant flow of data from X, xAI still has the tools to make a comeback if it can stabilize its team.
