“It wasn’t built right the first time” – Musk’s xAI system is starting over again

Then there were two: Of the original 11 co-founders who launched xAI with Elon Musk three years ago, only two remain as the Deep Learning Lab continues a staff overhaul to compete with Anthropic and OpenAI. Musk insists that this rebuilding process is by design.

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

The most pressing 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 didn’t compete effectively with Claude Code or Codex, rival programming assistants from Anthropic and OpenAI, respectively. Musk said the company held a comprehensive meeting on Wednesday focused on how to catch up, which he expected would be possible by the middle of this year.

Programming tools are very important because that’s where the money is. While the surge in users in the first year was fueled by xAI’s lax regulation of Grok’s ability to produce sexual and even offensive images, the programming tools are seen as the main revenue-generating technology for AI labs. This makes xAI’s current lag in this area more than just a problem of perception; It’s a business problem.

The personnel overhaul extends beyond this week. A month ago, 11 of xAI’s senior engineers, including two of the founders, left the company after changes that Musk described as a reorganization to fit a larger business. Apparently that effort wasn’t enough: The Financial Times reported that SpaceX and Tesla executives had parachuted into the company to evaluate employees and fire those who didn’t make the grade.

The remaining co-founders, Manuel Croes and Ross Nordin, along with Musk, have a difficult task ahead of them.

Musk now casts a wider net for talent. On Thursday, he said on Channel “I apologize,” Musk added, addressing the pile of strangers he had tracked down.

For comparison’s sake, 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 is at least one encouraging sign. Andrew Milich and Jason Ginsberg join xAI from AI coding tool company Cursor, where the two had joint responsibility for product engineering. Unlike xAI, Cursor relies on frontier laboratories to access the AI ​​models it runs on. Their decision to join xAI may indicate the importance of direct access to LLM and the computing resources to run it – and suggests that xAI’s core asset, its frontier model, remains an attractive draw.

In both cases, the pressure to show results is as much external as internal. Now that xAI is part of SpaceX, and with a public offering of SpaceX stock expected, the cash-burning unit is under pressure to show real uptake of Grok, its subsidiary LLM. (The AI ​​division’s faltering is not the story Musk needs investors to read.)

In the long term, Musk is betting on something bigger than programming tools. Macrohard’s xAI project — Musk is convinced the name is a “funny nod to Microsoft” — aims to create an AI agent capable of doing anything a white-collar worker can do on a computer. Toby Bohlen, who was tapped to lead the project in February, left within weeks, and this week, Business Insider reported that the Macrohard project was on pause.

Musk’s response was to include another of his companies in the project. It was 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 will guide the Tesla agent as it performs tasks.

It’s ambitious. Nor is it unique. Instead, the vision is not far off from what Perplexity — an AI-powered search engine — is doing with its new “Everything is a Computer” offering, which aims to provide enterprise users with a personalized “digital agent” that can coordinate their digital tasks. It also echoes what entrepreneur Peter Steinberger is now working on at OpenAI, after creating the popular OpenClaw personal agents.