Musk says xAI is being rebuilt from the foundations up

Elon Musk is initiating a top-to-bottom rebuild of xAI, citing a need to improve the company’s competitive standing in the AI market. On Thursday, xAI CEO Elon Musk commented on X that “xAI was not built right first time around, so is being rebuilt from the foundations up,” following a series of high-profile departures and strategic shifts.

The restructuring comes amid significant personnel churn. Of the original 11 co-founders, only two remain: Manuel Kroiss and Ross Nordeen. This week, co-founders Zihang Dai and Guodong Zhang left the company after Musk stated that xAI’s AI coding tools were not effectively competing with Claude Code or Codex, rival programming assistants made by Anthropic and OpenAI. Musk said the company held an all-hands meeting on Wednesday, predicting that xAI will catch up to competitors by the middle of this year. To bolster its engineering team, xAI recently hired Andrew Milich and Jason Ginsberg from Cursor. Unlike xAI, Cursor depends on external labs for access to the advanced AI models (frontier models) it runs on.

Currently, xAI operates with a smaller workforce than its primary competitors:

• xAI: just over 5,000 employees
• OpenAI: more than 7,500 employees
• Anthropic: more than 4,700 employees

To address the talent shortage, Musk is casting a wider net. On Thursday, Musk said on X that he and a colleague, Baris Akis, are reviewing rejected employment applications to find promising candidates who should have had an interview. Addressing those applicants, Musk offered his apologies for the oversight.

Beyond the personnel changes, xAI is integrating resources from SpaceX and Tesla to pivot its strategy. The Financial Times reported that SpaceX and Tesla executives are apparently evaluating employees and firing those who do not make the grade. Additionally, Business Insider reported that the Macrohard project is on pause. The project, which aims to create an AI agent—an AI capable of performing tasks on a computer—was previously led by Toby Pohlen, who was chosen to lead it in February. Musk revealed that Macrohard is a joint effort with Tesla, which is developing a complementary AI agent project called Digital Optimus. This project is distinct from xAI’s internal coding tools, which are focused on programming assistance. Meanwhile, the company is also navigating the fallout from an early-year user surge driven by the lax regulation of Grok’s ability to produce sexual and even abusive imagery.

Why it matters

xAI is undergoing a significant personnel and strategic overhaul to compete with rivals Anthropic and OpenAI, with the company’s coding tools and AI agents—software capable of executing tasks on a computer—becoming central to its business viability.