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Elon Musk Orders Sweeping Layoffs as xAI Fails to Catch Up
As the AI race heats up, xAI is starting from scratch.
Published Mar 13, 2026 4:28 PM EDT
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In a Thursday tweet, Elon Musk said he was looking to rebuild his AI startup xAI “from the foundations up” after admitting it wasn’t “built right first time around.”
The news comes amid a major exodus of cofounders, with a striking majority of them jumping ship over the last year. Amid the resulting leadership vacuum, the Financial Times reported on Friday that Musk had omitted a key detail in his latest missives on his social media platform. According to the paper’s sources, he’s ordered a round of sweeping layoffs at the company after becoming frustrated with a lack of progress on its AI coding software.
Many roles are reportedly being scrutinized. Musk reportedly ordered higher-ups from Tesla and SpaceX, the latter of which xAI was folded into earlier this year, to conduct audits and weed out anybody deemed to be underperforming — likely not what staffers, who were already complaining of burnout, wanted to hear.
The news comes just over a month after Musk announced he had “reorganized” xAI, admitting that it “unfortunately required parting ways with some people.”
The pressure is on. Following SpaceX and xAI’s merger, the space company is looking to go public at a staggering valuation of $1.25 trillion.
But keeping up in the heated AI race is proving far more difficult than Musk may have anticipated, given his decision to rework the entire thing mere months ahead of the biggest stock market listing in history.
Coding, in particular, has become a major focus, with Musk poaching two senior employees from AI coding startup Cursor. According to the FT, staffers have grown concerned that the training data of xAI’s chatbot Grok was lacking, causing it to lag far behind Anthropic’s popular Claude Code and OpenAI’s Codex.
“Grok is currently behind in coding,” Musk said at a conference earlier this week, as quoted by Business Insider. “The reason I was late for this was that I was just in a giant sort of all-hands on coding, going through all the things that need to happen to essentially exceed our competitors on coding, which I think we’ll do.”
Musk’s messaging surrounding the company’s AI product has been opaque. In August, the mercurial CEO announced the company’s latest AI project, “Macrohard,” a tongue-in-cheek jab squarely aimed at competitor Microsoft. Musk also said that he was combining Tesla and xAI’s efforts to develop a “digital Optimus,” a nod to the carmaker’s humanoid robot.
The man who was leading the “Macrohard” effort, former DeepMind researcher Toby Pohlen, left the company just 16 days after being put in charge of the project late last month.
Where that leaves the future of xAI’s coding tool remains to be seen.
Apart from being pushed out by Musk, who’s now trying to reboot the company from scratch, inside sources told the paper that people are quitting because they’re burnt out, an unsurprising development given the CEO’s infamously brutal micromanagement style. Insiders told the FT that the revolving door of talent was destroying morale.
“My next priorities: sleep for more than 8h, write down all the things I’ve learnt (I have a list), and then think about what I want to do next,” Pohlen wrote.
More on xAI: Elon Musk Says He’s Epically Screwed Up at xAI, Is Rebuilding “From the Foundations”
Victor Tangermann
Senior Editor
I’m a senior editor at Futurism, where I edit and write about NASA and the private space sector, as well as topics ranging from SETI and artificial intelligence to tech and medical policy.
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