And then there were two: Of the original 11 co-founders who kickstarted xAI with Elon Musk three years ago, only two remain as the deep learning lab continues a staff overhaul to compete with Anthropic and OpenAI. This retooling, Musk insists, is by design.
“xAI wasn’t built right the first time, so it’s being rebuilt from the ground up,” Musk said Thursday on his social media platform, X. In most ways, it’s not going so smoothly.
The most immediate pressure is competition. This week, xAI co-founders Zihang Dai and Guodong Zhang left the outfit after Musk complained that the company’s AI coding tools didn’t compete effectively with Claude Code or Codex, rival programming assistants made by Anthropic and OpenAI, respectively. Musk said the company held an all-hands meeting 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 are where the money is. While an early-year surge in users was fueled by xAI’s lax regulation of Grok’s ability to produce sexual and even abusive images, coding tools are seen as the main revenue-generating technology for AI labs. That makes xAI’s current lag in this area more than a perception problem; it’s a business problem.
The staff inspection extends far beyond this week. A month ago, 11 senior engineers at xAI, including two co-founders, left the company following changes that Musk described as a reorganization fit for a larger company. 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 been working for them.
Musk is now casting a wider net for talent. On Thursday, he said on X that he and another colleague, Baris Akis, are currently reviewing rejected job applications at the company to reach out to promising candidates who should have had a chance to interview. “I apologize,” Musk added, addressing the pile of strangers he had pranked.
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For 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 is at least one encouraging sign. Andrew Milich and Jason Ginsberg join xAI from AI coding tools company Cursor, where the two shared responsibility for product development. Unlike xAI, Cursor depends on Frontier Labs to access the AI models it runs on. Their decision to join xAI may signal the importance of direct access to LLMs and computing resources to run them – and suggest that xAI’s core asset, its own frontier model, is still an attractive draw.
Regardless, the pressure to show results is as much external as internal. Now that xAI is part of SpaceX, and with an expected public offering of SpaceX stock, the cash-burning entity is under pressure to demonstrate real uptake on Grok, its LLM. (A stumbling AI division is not the story Musk needs investors to read.)
In the long term, 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 capable of doing anything a white-collar worker can do on a computer. Toby Pohlen, who was tapped to lead the project in February, left within weeks, and this week Business Insider reported that Macrohard was on hiatus.
Musk’s response has been to drag another of his companies into the project. He revealed for the first time that Macrohard is a joint effort with Tesla, which is also developing a complementary agent called “Digital Optimus” – a reference to Tesla’s Optimus humanoid robot. In Musk’s description, the xAI language model would guide the Tesla agent as it performs tasks.
It is ambitious; nor is it unique. Instead, the vision isn’t far removed from what Perplexity — an AI-powered search engine — is doing with its new “Everything is Computer” offering, which aims to offer business users a dedicated “digital proxy” that can orchestrate their digital tasks. It also mirrors what entrepreneur Peter Steinberger is now working on at OpenAI, after creating OpenClaw’s popular personal agents.