Of the original 11 co-founders who started xAI with Elon Musk three years ago, only two remain as the deep learning institute continues to shake up its workforce to compete with Anthropic and OpenAI. Musk insists that the restructuring is deliberate.
“xAI was not built right from the start, so we are rebuilding it from the ground up,” Musk said on his social media platform X on Thursday.
The most pressing pressure is competition. This week, xAI co-founders Zihang Dai and Guodong Zhang left the company after Musk complained that the company’s AI coding tools did not compete effectively with rival programming assistants Claude Code and Codex, developed by Anthropic and OpenAI, respectively. Musk said the company held an all-hands meeting on Wednesday to focus on how to bounce back, and predicted it would be possible by the middle of this year.
Coding tools are very important because they are your source of money. The surge in users at the beginning of the year was driven by xAI’s lax regulations on Grok’s ability to generate sexual and abusive images, but the coding tool is seen as a key revenue-generating technology for AI labs. So the current lag in xAI in this space is not just a matter of perception. It’s a business problem.
The personnel overhaul will continue far beyond this week. A month ago, 11 senior engineers at xAI, including two co-founders, left the company in what Musk described as a reorganization geared toward larger businesses. The effort was clearly insufficient. The Financial Times reported that SpaceX and Tesla executives parachuted into the companies to evaluate employees and fire those who underperformed.
The remaining two co-founders, Manuel Crois and Ross Nordean, and Musk are given the jobs they deserve.
Mr. Musk is now casting an even wider net in recruiting talent. On Thursday, he told the X show that he and another colleague, Baris Akis, are currently reviewing job applications that have been rejected internally and are aiming to reach out to potential candidates who would have had a chance at an interview. “I’m sorry,” Musk added, addressing the many strangers he ghosted.
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For comparison, LinkedIn reports that xAI has just over 5,000 employees, compared to over 7,500 at OpenAI and over 4,700 at Anthropic.
On the employment front, there is at least one positive sign. Andrew Milich and Jason Pinsberg join xAI from AI coding tools company Cursor. The two were co-heads of product engineering. Unlike xAI, Cursor relies on Frontier Labs for access to the AI models it runs. Their decision to join xAI may demonstrate the importance of LLM and direct access to the computing resources to run it, and may suggest that xAI’s core asset, its unique frontier model, remains attractive.
In any case, the pressure to show results is both internal and external. Now that xAI is part of SpaceX and a public offering of SpaceX stock is expected, the cash-burning division is under pressure to demonstrate serious uptake of its LLM, Grok. (What Musk wants investors to read is not about the AI sector’s stumbling blocks.)
In the long run, Musk is betting on something bigger than coding tools. xAI’s Macrohard project — Musk believes the name is a “funny reference to Microsoft” — aims to create an AI agent that can do anything a white-collar worker can do on a computer. Toby Polen, who was chosen to lead the project in February, resigned within weeks, and this week Business Insider reported that Macrohard is on pause.
Musk’s response was to bring another of his companies into the project. He revealed for the first time that Macrohard is a joint venture with Tesla. Tesla is also developing a complementary agent called Digital Optimus, named after Tesla’s humanoid robot Optimus. The xAI language model, Musk explained, will provide instructions to the Tesla agent when performing tasks.
That’s ambitious. It’s not unique either. In fact, this vision isn’t too far off from what AI-powered search engine Perplexity is doing with its new “Everything is Computer” product. It aims to provide enterprise users with a dedicated “digital proxy” that can coordinate their digital tasks. This resonates with what entrepreneur Peter Steinberger is currently doing with OpenAI after creating OpenClaw’s popular personal agent.
