Elon Musk does not apologize often. So when he does, people pay attention.
In a post on X Thursday, Musk admitted that his artificial intelligence startup xAI “was not built right first time around” and is now “being rebuilt from the foundations up.” He also apologized to job candidates the company wrongly passed on, saying he and xAI talent head Baris Akis are combing through old interview records to reconnect with people who should have gotten a shot.
The admission is striking for a company that launched in 2023 with promises of cracking the universe’s mysteries. It is even more striking given the timing.
Timing raises serious questions
Just six weeks ago, SpaceX acquired xAI in a deal valuing the combined entity at $1.25 trillion. Before that, Tesla disclosed a $2 billion investment into xAI’s Series E round in its Q4 2025 shareholder letter. Now Musk is telling the world the thing he just sold to his own investors was broken.
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Tesla shareholders are already suing Musk for breach of fiduciary duty, arguing he diverted AI talent and resources away from Tesla to benefit his private ventures. This admission adds a new layer to those legal challenges.
It also comes as SpaceX prepares for what could be a record IPO later this year. A stumbling AI division is not the story Musk needs investors reading right now.
The cofounder exodus tells the story
Of the 12 people who cofounded xAI with Musk in 2023, only two remain. Manuel Kroiss and Ross Nordeen are the last ones standing.
The departures accelerated sharply in early 2026. Here is who has left.
Key xAI departures since January 2026
- Jimmy Ba: One of xAI’s most prominent AI researchers, he left in February amid reported tensions over model performance.
- Tony Wu: Departed the same week as Ba, with no public explanation given.
- Toby Pohlen: Put in charge of the ambitious “Macrohard” coding project, left just 16 days after being appointed.
- Guodong Zhang: Led xAI’s Imagine team. Confirmed his departure on X this week. Reuters reported Musk blamed him for coding product shortfalls.
- Zihang Dai: Worked on Grok’s coding capabilities. Left earlier this week, per Reuters.
The exits are not just about personnel. Insiders describe a combination of burnout, Musk’s management style, and an organizational structure that was never built to sustain the kind of aggressive AI development the company promised.
Grok is falling behind
The immediate trigger for this week’s reset is Grok’s performance on coding tasks. Musk said at a conference this week that “Grok is currently behind in coding,” a candid admission given that AI-assisted software development has become the most commercially valuable near-term application of large language models.
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Anthropic’s Claude Code and OpenAI’s Codex are pulling ahead. To close the gap, xAI has poached two senior engineers from AI coding startup Cursor: Andrew Milich and Jason Ginsberg. Both will report directly to Musk.
Beyond coding, xAI faces broader reputational headwinds. Grok has drawn government scrutiny in multiple countries after its image generator was found producing non-consensual intimate imagery with minimal safeguards. That has complicated the company’s pitch to enterprise customers who might otherwise have considered Grok as a legitimate alternative to OpenAI or Anthropic.
Musk is betting on a pattern
Musk has been here before. Tesla was months from bankruptcy when it launched the Model 3. SpaceX had three rocket failures before its fourth mission succeeded. In both cases, he blew things up and rebuilt leaner.
The question is whether that playbook works in AI, where the competitive landscape shifts every few months and the penalty for falling behind compounds fast.
SpaceX and Tesla executives have already been sent into xAI to audit teams and identify underperformers, per Reuters. Musk is also reaching back out to job candidates xAI previously rejected, hoping to rebuild the talent pipeline from scratch.
Whether investors in Tesla and SpaceX knew the full picture before committing billions to xAI is a question regulators and shareholders are now starting to ask. Musk’s track record on turnarounds is real. But the stakes on this one are higher than anything he has attempted before.
