Elon Musk admits xAI ‘wasn’t built right’ as only 2 co-founders remain and its biggest AI bet stalls out

Elon Musk said he is rebuilding xAI from the ground up just a month after SpaceX acquired his AI startup in one of the biggest mergers of all time.

Following a gradual exodus from xAI, the world’s richest man is trying to reimagine the company with heightened ambitions.

The Tesla and SpaceX CEO added in a post on X last week that xAI was undergoing a process similar to an earlier one at Tesla, which Musk has been CEO of since 2008.

“xAI was not built right first time around, so is being rebuilt from the foundations up,” he wrote in the post.

Musk said the purpose of the SpaceX acquisition is building “orbital data centers,” which he has said are the most cost-effective way of producing AI computing power.

Yet here on Earth, Musk is dealing with a seemingly less lofty, but all-too-important, staffing issue. A pair of xAI cofounders left the company last week and two others bailed last month, Business Insider reported, meaning nine of the original 11 cofounders not named Musk have left the company since 2024. These most recent departures come after an exodus of about a dozen senior engineers.

The precipitous loss of talent has stalled the company’s biggest AI bet. “Macrohard,” its effort to build an AI agent capable of doing anything a white collar worker can do, has reportedly been put on “pause” in the past days as its leader, Toby Pohlen, left the company just weeks after being appointed to head the project.

While all the exits raise questions about the company’s future, Musk has downplayed the brain drain as part of a planned reorganization. Some employees are better suited for the early stage of a venture rather than the later stages, he said at an all-hands meeting last month, according to the New York Times.

Representatives for xAI did not immediately respond to a request for comment.

The xAI CEO is now looking to aggressively hire, albeit from an extremely limited pool of AI-focused workers. Already, the AI company has been able to poach two employees, Andrew Milich and Jason Ginsberg, from AI coding company Cursor, The Information reported.

These hires are key because of the potential growth in the coding tools market, which stood at $7.65 billion as of 2025 and is projected to grow to $22.2 billion by 2030. Cursor itself was valued at $29.3 billion after raising $2.3 billion in a funding round in November.

Despite this successful recruitment, Musk said he and a colleague are looking over rejected xAI applications to look for promising candidates.

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

This story was originally featured on Fortune.com