‘Not built right the first time’ — Musk’s xAI is starting over again, again

And then there were two: Of the original eleven co-founders who launched xAI with Elon Musk three years ago, only two remain as the deep learning lab continues a personnel overhaul to compete with Anthropic and OpenAI. That reconstruction, Musk emphasizes, is a design.

“xAI wasn’t built right the first time, so it’s being rebuilt from the ground up,” Musk said said Thursday on his social media platform X. By most measures, things aren’t going so smoothly.

The most direct pressure is competition. This week, xAI co-founders Zihang Dai and Guodong Zhang left the team after Musk complained that the company’s AI coding tools did not compete effectively with Claude Code or Codex, rival programming assistants from Anthropic and OpenAI, respectively. Musk said the company held a meeting on Wednesday focusing on catching up, which he said could be possible by the middle of this year.

Coding tools are so important because that’s where the money is. While a surge of users early in the year was driven by xAI’s lax regulation of Grok’s ability to produce sexual and even offensive 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 personnel overhaul goes well beyond this week. A month ago, eleven senior engineers at xAI, including two co-founders, left the company following changes that Musk described as a reorganization befitting a larger company. That effort was apparently insufficient: The Financial Times reported that executives from SpaceX and Tesla have swooped into the company to assess employees and fire those who don’t make the cut.

For the two remaining co-founders, Manuel Kroiss and Ross Nordeen, and Musk, there is work to be done.

Musk is now casting a wider net for talent. On Thursday he said on X that he and another colleague, Baris Akisare currently being assessed rejected job applications in the company, with a view to reaching promising candidates who should have been given the opportunity to apply. “My apologies,” Musk added, addressing the pile of strangers he had ghosted.

By comparison, LinkedIn reports that xAI has just over 5,000 employees, compared to over 7,500 at OpenAI and over 4,700 at Anthropic.

There is at least one encouraging sign on the hiring front. Andrew Milich and Jason Ginsberg join xAI from AI coding tool company Cursor, where the two shared responsibility for product engineering. Unlike xAI, Cursor relies on border labs for access to the AI ​​models it runs on. Their decision to join xAI may be an indication of the importance of direct access to LLM and computing resources to run it – and suggests that xAI’s core asset, its own frontier model, is still an attractive draw.

Either way, the pressure to show results is both external and internal. Now that xAI is part of SpaceX, and a public offering of SpaceX shares is expected, the cash-burning unit is under pressure to demonstrate real acceptance of Grok, its LLM. (A stumbling AI division is not the story Musk wants investors to read.)

Longer term, Musk is betting on something bigger than coding tools. xAI’s Macrohard project – Musk is convinced the name is “a funny reference to Microsoft” – aims to create an AI agent that can do everything an office worker can do on a computer. Toby Pohlen, who was picked to lead the project in February, left within weeks, and this week Business Insider reported that Macrohard was on pause.

Musk’s response was to involve another of his companies in 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 humanoid robot Optimus. At Musk descriptionthe xAI language model would direct the Tesla agent to perform tasks.

It’s ambitious; it is also not unique. Instead, the vision isn’t far off from what Perplexity – an AI-powered search engine – is doing with its new “Everything is computer” offering, which aims to provide business users with a dedicated “digital proxy” that can orchestrate their digital tasks. It also reflects what entrepreneur Peter Steinberger is now working on at OpenAI, after creating OpenClaw’s popular personal agents.