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

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 personnel overhaul to compete with Anthropic and OpenAI. That rebuilding, insists Musk, is by design.

“xAI was not built right first time around, so is being rebuilt from the foundations up,” Musk said Thursday on his social media platform, X. By most measures, it isn’t going all that smoothly.

The most immediate pressure is competitive. This week, xAI co-founders Zihang Dai and Guodong Zhang left the outfit after Musk complained that the company’s AI coding tools were not effectively competing with Claude Code or Codex, rival programming assistants made by Anthropic and OpenAI, respectively. Musk said the company held an all-hands meeting on 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’re where the money is. While an early-year surge of users was powered by xAI’s lax regulation of Grok’s ability to produce sexual and even abusive imagery, coding tools are seen as the key revenue-generating tech for AI labs. That makes xAI’s current lag in this area more than a perception issue; it’s a business problem.

The personnel overhaul extends well beyond this week. A month ago, 11 senior engineers at xAI, including two co-founders, left the company following changes Musk described as a reorganization to suit a larger business. 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 their work cut out for them.

Musk is now casting a wider net for talent. On Thursday, he said on X that he and another colleage, Baris Akis, are currently reviewing rejected employment applications in the company, with an eye toward reaching out to promising candidates who should have had a chance to interview. “My apologies,” Musk added, addressing the pile of strangers he’d ghosted.

For the sake of 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’s at least one encouraging sign. Andrew Milich and Jason Ginsberg are joining xAI from the AI coding tool company Cursor, where the two held joint responsibility for product engineering. Unlike xAI, Cursor depends on frontier labs for access to the AI models it runs on. Their decision to join xAI may signal the importance of direct access to LLM and computing resources to run them — and suggest that xAI’s core asset, its own frontier model, is still an attractive draw.

Either way, the pressure to show results is as much external as it is internal. Now that xAI is part of SpaceX, and with a public offering of SpaceX shares anticipated, the cash-burning unit is under pressure to demonstrate real uptake on Grok, its LLM. (A stumbling AI division is not the story Musk needs investors to be reading.)

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 capable of doing anything a white-collar worker can do on a computer. Toby Pohlen, chosen to lead the project in February, left within weeks, and this week, Business Insider reported that Macrohard was on pause.

Musk’s response has been to draft 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 dubbed “Digital Optimus” — a reference to Tesla’s Optimus humanoid robot. In Musk’s description, the xAI language model would direct the Tesla agent as it performs tasks.

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