The exodus is complete. Every co-founder recruited by Elon Musk to build xAI, his artificial intelligence company, has now departed, raising serious questions about the future of the ambitious venture. The final two, Manuel Kroiss, who led the pretraining team, and Ross Nordeen, described by Business Insider as Musk’s “right-hand operator,” left this month and Friday, respectively. Their departures follow a nearly two-year pattern of exits from a company that, despite its internal challenges, was valued at $250 billion following its acquisition by SpaceX in February.
The unraveling of xAI’s founding team isn’t typical startup attrition. Musk assembled a group of researchers widely considered to be among the most accomplished in the field of artificial intelligence. Jimmy Ba, a co-author of the highly influential 2014 Adam optimization paper – cited over 95,000 times – was among those who joined the effort. Others, like Igor Babuschkin, formerly of Google DeepMind, and Christian Szegedy, previously with Google, brought significant expertise. The collective loss of this talent, at a time when the demand for AI specialists is at a fever pitch, is a striking development.
The departures coincide with a period of significant restructuring for xAI. On February 2, SpaceX completed an all-stock acquisition of xAI, valuing SpaceX at $1 trillion and xAI at $250 billion, creating a combined entity worth $1.25 trillion – the largest corporate merger by valuation in history. This consolidation brought xAI, X (formerly Twitter), and SpaceX under a single corporate umbrella, with SpaceX now preparing for a potential initial public offering (IPO) in mid-2026 that could target a $1.75 trillion valuation.
A Timeline of Departures
The first cracks in the founding team appeared in February 2025 with the departure of Christian Szegedy. Yet, the pace of exits accelerated dramatically in early 2026. On February 10, 2026, Tony Wu, a key operational leader at xAI, announced his resignation. Within 24 hours, Jimmy Ba followed suit, reportedly due to disagreements over demands to improve model performance. By mid-March, only Kroiss and Nordeen remained, completing the sweep of departures this week.
The timing is inextricably linked to the broader corporate changes. In January, Tesla invested $2 billion in xAI’s Series E funding round, valuing the company at approximately $230 billion. This investment, however, has triggered a lawsuit from Tesla shareholders alleging breach of fiduciary duty, arguing that Musk directed company funds into a private venture. The legal challenge gained momentum on March 13, when Musk publicly conceded that xAI’s coding tools were not competitive with offerings from Anthropic’s Claude Code or OpenAI’s Codex. This admission underscored the scale of the challenges facing xAI, even after substantial investment.
“Not Built Right” at a Quarter Trillion Dollar Valuation
Musk’s candid assessment on March 13 – that xAI’s systems “were not built right the first time around” – is particularly noteworthy given the company’s recent valuation and acquisition. The statement effectively validated the decisions of the departing co-founders. If the company’s leadership acknowledges fundamental flaws in the product, researchers have limited incentive to remain for a complete rebuild, especially when they are in high demand elsewhere.
The artificial intelligence talent market in 2026 is exceptionally competitive. Reports indicate that Meta has offered compensation packages worth up to $300 million over four years to retain top AI researchers. OpenAI, Google DeepMind, and Anthropic are all aggressively expanding their research teams. The eleven researchers who have left xAI represent a concentration of expertise that would be highly sought after by any of these organizations.
Despite the loss of its founding team, xAI possesses significant assets. The Colossus supercomputer, equipped with over 200,000 NVIDIA H100 GPUs, remains one of the world’s largest AI training clusters. Grok, the company’s chatbot, benefits from a distribution channel through the X (formerly Twitter) user base. The SpaceX merger provides access to substantial capital, infrastructure, and engineering talent. However, the question remains whether these resources are sufficient to overcome the loss of the research leadership that was intended to drive the company’s competitive edge.
A Recurring Pattern?
The mass departure of xAI’s co-founders echoes a pattern observed at other companies led by Elon Musk. Following his acquisition of Twitter in 2022, the platform experienced a significant turnover in senior leadership and roughly 80 percent of its workforce. Similarly, Tesla’s senior ranks have gradually thinned as Musk’s attention has been divided across his six companies. A common thread appears to be a management style that excels in hardware engineering – as demonstrated by the success of SpaceX and Tesla – but may be less effective in research-intensive fields where highly skilled individuals have numerous opportunities and a low tolerance for instability.
The current AI landscape is defined by intense competition for talent. The researchers who initially joined xAI were not compelled to do so; they were attracted by the potential resources and ambitious vision Musk presented. The fact that every one of them has now chosen to leave, particularly during a period of substantial valuation and access to SpaceX’s resources, suggests that the core issues at xAI are not financial or infrastructural, but organizational. Rebuilding a research culture, once its architects have departed, is a formidable challenge, and one that capital alone cannot solve.
The next key development will likely be the outcome of the Tesla shareholder lawsuit regarding the $2 billion investment in xAI. A court decision could significantly impact the company’s financial stability and future direction. XAI continues to operate under the umbrella of SpaceX, and further details regarding its integration and strategic plans are expected in the coming months.
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