Elon Musk says xAI must be 'rebuilt' as co-founder exodus continues, SpaceX IPO awaits

In a surprising turn of events, Elon Musk has revealed that his artificial intelligence venture, xAI, is undergoing a significant reconstruction. This admission comes less than six weeks after Musk merged SpaceX and xAI in a deal he valued at a staggering $1.25 trillion. According to Musk, the startup 'was not built right the first time around,' prompting the decision to rebuild it from the ground up. This announcement follows a wave of departures from xAI, with several co-founders stepping down recently. The latest exits included Zihang Dai and Guodong Zhang, who reportedly left the company this week. Last month, influential researcher Jimmy Ba expressed his gratitude for his time at xAI before announcing his departure. His exit came on the heels of Tony Wu’s resignation, and Toby Pohlen's departure in February, leaving Musk with only two of the original co-founders still on board. As this exodus unfolds, SpaceX is also gearing up for a potential public offering later this year, which could break records if successful. After the merger, SpaceX was valued at $1 trillion while xAI's segment was assessed at $250 billion, as per documents reviewed by CNBC. Musk had previously leveraged xAI to acquire his social media platform X, formerly known as Twitter, in an all-stock deal announced last March. Recently, SpaceX made headlines by hiring two programmers from the fast-growing AI startup Cursor, Andrew Milich and Jason Ginsberg. However, reports indicate that Musk has initiated job cuts in response to the rapid advancements being made by competitors like OpenAI and Anthropic in AI coding tools. Musk addressed the situation on X, expressing regret for the talented individuals who were overlooked in the hiring process at xAI. He stated that he and Baris Akis, who oversees engineering talent at xAI, are reviewing past interview records to reconnect with promising candidates. Compounding these challenges, xAI is grappling with controversies surrounding its chatbot and image generator, Grok, which is currently under investigation in various international jurisdictions. The issues arose when Grok allowed users to generate non-consensual sexual imagery, leading to serious ethical concerns. Despite these setbacks, xAI has been investing heavily in infrastructure, particularly in Memphis, Tennessee, where it has recently secured permits to construct one of the largest natural gas power plants in the region to support its data centers. Additionally, Tesla is collaborating with xAI in various capacities, including integrating Grok into its vehicle systems and utilizing Grok models for the development of Optimus humanoid robots. Furthermore, Tesla has provided xAI with significant resources, including hundreds of millions of dollars in backup batteries for its data centers. Neither Musk nor xAI has issued a comment on the current situation as they navigate these tumultuous waters.