xAI staff say company flails amid constant upheaval, raising concerns

xAI’s internal turmoil has intensified after Elon Musk ordered a fresh wave of layoffs and brought in “fixers” from his other ventures to audit the startup’s work, according to Ars Technica. The cuts came on the heels of a disappointing performance by the company’s coding product, which lagged behind Anthropic’s Claude Code and OpenAI’s Codex, prompting Musk to blame the quality of the training data and to demand a rapid rebuild of the platform’s foundations. Musk’s frustration was evident in a town‑hall meeting posted online, where he publicly chastised the coding team and announced a reorganization that would see several co‑founders removed, including Zihang Dai, who had previously acknowledged the product’s shortcomings, and Guodong Zhang, who was stripped of his pre‑training duties before exiting on Thursday, per two insiders familiar with the matter.

The restructuring has also seen the departure of senior technical staff who were once central to xAI’s launch. Of the original 11 co‑founders who helped Musk set up the San Francisco‑based AI lab in March 2023, only Manuel Kroiss (known as “Makro”) and Ross Nordeen remain, Ars Technica reports. Earlier this year, Musk merged SpaceX with xAI in a $1.25 billion deal and appointed managers from SpaceX and Tesla to evaluate employee output, resulting in further firings after they deemed work “inadequate.” One of the most visible casualties was Toby Pohlen, a former DeepMind researcher who had been put in charge of the “Macrohard” project—a tongue‑in‑cheek reference to Microsoft aimed at building digital agents capable of replicating entire software companies. Pohlen left just 16 days after his appointment, and Musk subsequently redeployed Ashok Elluswamy, head of AI software at Tesla, to revive the effort and audit prior work.

Musk’s aggressive timeline adds pressure to an already strained operation. The billionaire has set a June deadline for what could become the “biggest stock‑market listing in history,” a goal that hinges on xAI’s ability to catch up with rivals that have already secured footholds in enterprise AI and software development tools. While the company recently closed a $20 billion Series E round—an upsized funding event reported by Reuters—the influx of capital has not translated into market traction for its flagship Grok chatbot or its coding suite, both of which have struggled to attract paying individual users or business customers. Musk’s public statements on X, likening the current rebuild to the early days of Tesla, underscore the expectation that the startup must overhaul its core technology and data pipelines before it can justify the lofty valuation implied by the fundraising round.

The constant upheaval is eroding morale, according to multiple staff members who spoke to Ars Technica on the condition of anonymity. Employees describe a “flailing” organization where leadership changes, abrupt terminations, and the insertion of external “fixers” have created a climate of uncertainty and fear. The loss of senior engineers, combined with the pressure to deliver a competitive coding product under a tight deadline, has left many questioning the sustainability of Musk’s hands‑on approach. The internal discord mirrors broader industry trends where rapid scaling and aggressive timelines often clash with the need for stable, long‑term research and development pipelines.

Analysts observing the situation note that xAI’s challenges are not merely technical but also strategic. The merger with SpaceX and the cross‑deployment of talent from Tesla suggest Musk is attempting to leverage his aerospace and automotive expertise to accelerate AI development, yet the cultural and operational differences between these domains may be contributing to the current friction. Moreover, the “Macrohard” initiative, while ambitious, has yet to produce a tangible product, and its frequent leadership turnover raises doubts about its feasibility. As competitors continue to roll out mature AI coding assistants and enterprise solutions, xAI’s ability to close the gap will depend on whether Musk can stabilize the workforce, improve data quality, and deliver a compelling value proposition before the June listing deadline.