Elon Musk’s xAI reset: Why the founder says the AI company was ‘not built right’ and is now rebuilding it from the ground

Elon Musk says his artificial intelligence venture xAI is undergoing a fundamental reset as the company attempts to catch up with major competitors such as OpenAI and Anthropic. The change comes amid senior staff departures, internal restructuring and pressure to improve the company’s performance in key areas such as AI coding tools and enterprise adoption.

In a post on X on Thursday, Musk said the company was effectively starting again. “xAI was not built right the first time around, so is being rebuilt from the foundations up,” he wrote. The statement came after Musk reportedly held an all-hands meeting at the company last week to discuss plans for the Grok developer to catch up with competitors by mid-2026.

xAI was founded roughly three years ago by Musk and a group of 11 AI researchers. Since then, most of those original founders have departed. Only two of the original co-founders remain at the company today.

The organisation currently has just over 5,000 employees. That workforce is smaller compared to competitors such as OpenAI, which has more than 7,500 employees, and Anthropic, which has over 4,700.

In recent weeks, co-founders Zihang Dai and Guodong Zhang left the company. Their exits reportedly followed Musk’s complaints that xAI’s coding tools were not as capable as rival AI programming assistants including Anthropic’s Claude Code and OpenAI’s Codex.

Earlier, in February, several senior engineers at xAI also departed. Among them were two co-founders. Musk described the changes as part of a reorganisation designed to align the company with the needs of a larger business.

At the same time, the company’s ownership structure also changed. Earlier this year, xAI was acquired by Musk-led SpaceX in a record-setting deal intended to address the AI developer’s rising costs linked to chips, data centres and energy requirements.

Following the merger, employees from SpaceX and Tesla were brought into xAI to evaluate staff performance and remove under-performing employees, according to a report by the Financial Times.

Despite the internal challenges, xAI has experienced growth in its user base. Much of that increase was driven by the company’s relatively relaxed safeguards around the capabilities of its chatbot, Grok.

However, this approach also drew criticism from regulators worldwide after Grok was used to generate non-consensual sexual imagery of individuals. In some cases, the generated content reportedly involved minors.

While the chatbot has gained users, xAI has struggled to capture a significant share of the enterprise market. Rival companies have been more successful in areas such as AI coding tools, programming assistants and automation plug-ins.

Enterprise AI is considered an important market because it can generate recurring revenue. As a result, xAI faces pressure to show stronger external results, especially now that it operates as part of SpaceX. This pressure could increase further because a public offering of SpaceX shares is anticipated. Investors are unlikely to view a loss-making unit positively if it continues to consume significant capital.

Despite the challenges, Musk has publicly expressed confidence in xAI’s prospects. Responding to a user on X who argued that Anthropic, Google and OpenAI were tied for the leading position in AI development while Meta and xAI were about seven months behind, Musk dismissed the gap.

He wrote that xAI would catch up this year and then surpass competitors by a wide margin within three years. According to Musk, the gap would become so large that “you will need the James Webb telescope to see who is in second place.”

To support that ambition, the company has begun searching for additional AI talent. Musk said the team is reviewing previously rejected job applications to identify candidates who should have been offered interviews.

Two executives from the AI coding startup Cursor—Andrew Milich and Jason Ginsberg—are reportedly joining the company to strengthen product engineering capabilities.

xAI is also exploring new technologies beyond coding tools. One goal is to develop an AI agent capable of performing tasks typically handled by white-collar workers on a computer.

Another initiative involves collaboration between Tesla and xAI on a project called “Macrohard”. The effort aims to build an AI system capable of replicating the functions of software companies. The system would combine xAI’s frontier AI model as a high-level navigator with a Tesla-developed autonomous AI agent that processes real-time computer screen video along with keyboard and mouse actions.

Together, these steps form part of Musk’s broader attempt to rebuild xAI and position the company as a stronger competitor in the global AI race.