And there were two people. Of the original 11 co-founders who started xAI with Elon Musk three years ago, only two remain as the deep learning lab continues to overhaul its workforce to compete with Anthropic and OpenAI. Musk claims that this rebuild was by design.
“xAI is being built from the ground up because it wasn’t built right from the beginning,” Musk said on his social media platform X on Thursday. By most standards, it’s not going smoothly.
The most immediate 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 Claude Code or Codex, rival programming assistants created by Anthropic and OpenAI, respectively. Musk said the company held an all-hands meeting on Wednesday focused on how to catch up, which he predicted could be done by mid-year.
Coding tools are very important because that’s where the money is. Although xAI’s lax regulations on Grok’s ability to create sexual and even offensive images helped fuel the initial surge in users, the coding tool is considered the AI lab’s main revenue-generating technology. This makes xAI’s current lag in this area more than just a perception issue. It’s a business issue.
Personnel inspections will continue beyond this week. A month ago, 11 of xAI’s top engineers, including two co-founders, left the company in a shift that Musk described as a reorganization of the organization to suit larger operations. Those efforts were clearly insufficient. The Financial Times reported that SpaceX and Tesla executives were parachuted into the companies to evaluate employees and fire those who didn’t make the grade.
The remaining two co-founders, Manuel Kroiss and Ross Nordeen, have their work cut out for them with Musk.
Musk is now casting a wider net to secure talent. On Thursday, he said he and Baris Akis, another colleague at “I’m sorry,” Musk added, speaking to the numerous strangers he had ghosted.
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For comparison, LinkedIn reports that xAI has just over 5,000 employees. By comparison, OpenAI has more than 7,500 employees and Anthropic has more than 4,700 employees.
On the hiring side, there is at least one encouraging sign. Andrew Milich and Jason Ginsberg join xAI from AI coding tools company Cursor, where they jointly led product engineering. Unlike xAI, Cursor relies on Frontier Lab to access the AI models it runs on. The decision to join xAI may signal the importance of having direct access to LLMs and computing resources to run them, and may suggest that xAI’s core asset – its own frontier model – remains an attractive attraction.
Either way, the pressure to show results is as much external as it is internal. Now that xAI is part of SpaceX, and with an expected public offering of SpaceX stock, the cash-burning division is under pressure to demonstrate real utility for Grok, an LLM. (AI’s stumbling block isn’t something Musk needs investors to read.)
In the long term, Musk is investing in something bigger than coding tools. xAI’s Macrohard project (Musk assures me its name is “a fun reference to Microsoft”) aims to create an AI agent that can do anything an office worker can do on a computer. Toby Pohlen, who was chosen to head the project in February, left within a few weeks, and Business Insider reported this week that Macrohard is on a brief hiatus.
Musk’s response was to get other companies involved in the project. He revealed for the first time that Macrohard is working jointly with Tesla to develop a complementary agent called “Digital Optimus,” a reference to Tesla’s Optimus humanoid robot. In Musk’s explanation, the xAI language model instructs Tesla agents as they perform tasks.
It’s ambitious. It’s also not unique. Instead, that vision isn’t all that different from what Perplexity, an AI-powered search engine, is doing with its new “Everything is Computer” product, which aims to give enterprise users a dedicated “digital proxy” to orchestrate their digital efforts. It also reflects what entrepreneur Peter Steinberger is currently working on at OpenAI after creating OpenClaw’s popular personal agent.
