Elon Musk says xAI “was not built right” as co-founders exit and company undergoes major rebuild

Elon Musk rarely admits that one of his companies started on the wrong footing. This week, he did exactly that. In a post on X, Musk acknowledged that his artificial intelligence company xAI is being rebuilt from scratch after early design choices fell short.

Less than six weeks after Elon Musk merged SpaceX and xAI in a deal he valued at $1.25 trillion, the world’s richest person is acknowledging that his AI venture “was not built right first time around, so is being rebuilt from the foundations up.”

The remark lands at a turbulent moment for the company. Several founding members of xAI have quietly walked away during the past few months, leaving only a small group from the original 2023 launch team still inside the company.

Among the most recent departures are Zihang Dai and Guodong Zhang. Earlier this year, respected machine learning researcher Jimmy Ba announced his exit in a message posted on X.

“Grateful to have helped cofound at the start,” Ba wrote.

Tony Wu left around the same period. Toby Pohlen exited soon after. The series of departures has raised eyebrows within the AI community, where founding researchers often shape a lab’s long-term direction.

Inside xAI’s Turbulence: Musk Says AI Startup Is Being Rebuilt After Talent Exodus

The leadership shakeup arrives less than six weeks after Musk combined xAI with SpaceX in a massive internal restructuring. Musk placed the combined value of the businesses at roughly $1.25 trillion.

Documents reviewed by CNBC show SpaceX accounting for the bulk of that number at $1 trillion, with xAI valued at $250 billion inside the merged structure.

The integration reflects Musk’s larger strategy: weave artificial intelligence across his companies rather than treat it as a standalone lab.

That approach already shows up across the ecosystem. Tesla agreed last month to invest $2 billion into xAI as part of a previously announced $20 billion funding round. Tesla engineers are integrating the Grok chatbot into vehicle systems and experimenting with the models inside the Optimus humanoid robot project.

Tesla has become a supplier as well. The automaker has sold hundreds of millions of dollars’ worth of its large-scale battery systems to xAI for use inside energy-hungry AI data centers.

Infrastructure is becoming a defining cost center for the company. xAI has been building data and power capacity around Memphis, Tennessee. The company recently secured approval in Mississippi to build a massive natural-gas power plant intended to support future computing clusters.

The hiring strategy is shifting as the company rebuilds. SpaceX confirmed that two engineers from the AI coding startup Cursor, Andrew Milich and Jason Ginsberg, joined the team.

A report from the Financial Times said Musk has ordered job cuts after reviewing the progress of AI coding systems from competitors such as OpenAI and Anthropic. Those tools have gained strong traction among developers and have become a new battleground in the AI race.

Musk acknowledged the hiring challenge directly.

“Many talented people over the past few years were declined an offer or even an interview @xAI,” he wrote. “My apologies.”

Many talented people over the past few years were declined an offer or even an interview @xAI. My apologies.@BarisAkis and I are going through the company interview history and reaching back out to promising candidates. https://t.co/tvhipa1lu1

— Elon Musk (@elonmusk) March 13, 2026

He said he and Baris Akis, who oversees engineering recruitment, are reviewing past interview records and reaching out again to promising candidates who slipped through the cracks.

The company faces another set of pressures tied to its flagship AI system, Grok.

The chatbot and image generator have triggered investigations in multiple countries after users discovered ways to generate non-consensual explicit imagery using photos of real people. Governments began examining the platform soon after the issue surfaced.

“In addition to losing early talent and falling behind in AI-powered coding, xAI faces a number of controversies surrounding its chatbot and image generator Grok, which is the subject of government investigations in multiple international jurisdictions,” CNBC reported.

At the same time, Grok has gained traction inside the federal government. Under the administration of Donald Trump, the system secured contracts with the U.S. Department of Defense and the General Services Administration.

The mixed picture reflects the current state of the company: aggressive expansion paired with internal restructuring.

One more milestone looms on the horizon. SpaceX is preparing for a public listing expected sometime this year. If the IPO moves forward, it could rank among the largest technology offerings ever attempted.

That timing makes Musk’s public admission about xAI especially striking. Startup founders rarely concede that the first version of a company missed the mark.

Musk did.

The next phase now hinges on whether the rebuild he described can keep pace with rivals that already hold a strong lead in the AI race.