A major internal shake-up is underway at Elon Musk’s artificial intelligence company xAI as the organisation attempts to rebuild its structure while facing growing competition in the AI industry. Out of the original 11 co-founders who launched the deep learning lab with Musk 3 years ago, only 2 remain. Musk acknowledged the reset publicly, writing on his social platform, X, “xAI was not built right first time around, so is being rebuilt from the foundations up.” However, the transition has not been entirely smooth.
The most immediate challenge is competition in AI-powered coding tools, an area increasingly seen as a key revenue source for AI labs. This week, xAI co-founders Zihang Dai and Guodong Zhang left the company after Musk criticised the firm’s coding assistants for lagging behind competing products such as Claude Code and Codex. These tools are developed by rival AI companies and are widely used by developers. Musk said an all-hands meeting was held on Wednesday to discuss how to close the gap, adding that he expects progress by the middle of this year.
The leadership overhaul extends beyond recent departures. Around a month ago, 11 senior engineers, including 2 co-founders, exited the company following a reorganisation that Musk said was needed to support a larger business. Reports from a media outlet also said executives from Tesla and SpaceX were brought in to assess staff performance and remove employees who failed to meet expectations. At present, only 2 co-founders — Manuel Kroiss and Ross Nordeen — remain alongside Musk. The company currently employs just over 5,000 people, compared with more than 7,500 at OpenAI and over 4,700 at Anthropic.
Musk is also widening the hiring effort. On Thursday, he said he and colleague Baris Akis were reviewing previously rejected job applications to identify candidates who deserved interviews. “My apologies,” Musk wrote while addressing applicants who may have been overlooked. At the same time, Andrew Milich and Jason Ginsberg from the AI coding tool company Cursor have joined xAI to lead product engineering. Meanwhile, the company’s ambitious “Macrohard” project — aimed at building an AI agent capable of performing most white-collar computer tasks — has been paused after its newly appointed lead Toby Pohlen left within weeks. Musk later revealed that Macrohard is now being developed jointly with Tesla, which is also working on a related agent called “Digital Optimus.” According to Musk, the xAI language model would guide the Tesla agent while it carries out digital tasks.
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