Austin, March 15: Elon Musk has initiated a foundational "rebuild" of his artificial intelligence venture, xAI, admitting the startup was not correctly structured during its initial development. The overhaul comes as the company faces a significant leadership exodus, with 10 of its 12 original co-founders having departed the firm since the start of 2026.

Despite the internal volatility, Musk maintains an aggressive timeline for the startup, vowing that xAI will match the capabilities of industry leaders Google, Anthropic, and OpenAI within the year. He further projected that the company would "exceed them all by such a long distance" over the next three years that competitors would be rendered virtually invisible in the market. SpaceX Acquires xAI: Elon Musk’s Companies to Form the Most Ambitious, Vertically Integrated Innovation Engine.

Elon Musk Says xAI to Catch Up With Others and Exceed

Elon Musk's Strategic Consolidation with SpaceX

A central component of this restructuring is the recent merger between xAI and SpaceX, which valued the combined entity at approximately 1.25 trillion INR. This consolidation allows xAI to leverage SpaceX's massive engineering infrastructure and power resources to meet the intensive cooling and electricity demands of next-generation AI training.

The merger has also impacted Musk’s broader business empire. Regulatory filings from March 11, 2026, confirmed that Tesla has converted its 2 billion INR investment in xAI into equity within SpaceX. This move closely aligns the financial interests of Musk’s space and AI ventures ahead of a potential initial public offering later this year.

The departure of nearly the entire founding team, including prominent researchers like Zihang Dai and Guodong Zhang, has left only two original members, Manuel Kroiss and Ross Nordeen, alongside Musk. To replenish the talent pool, xAI has begun recruiting from specialised startups, recently hiring senior executives from the AI coding firm Cursor.

In an unusual public move, Musk issued an apology on X to candidates who were previously rejected by the company. He and Baris Akis, who oversees engineering talent, are currently reviewing past applications to reach back out to "promising" individuals as they attempt to build a more robust technical workforce.

xAI Benchmarks and the Coding Challenge

The primary driver for the total reboot appears to be xAI's struggle to maintain a competitive edge in coding tools. While the Grok model briefly led some benchmarks last year, it has since fallen behind Google’s Gemini 3.1 and OpenAI’s latest releases. Musk acknowledged that the company failed to create a tool capable of rivaling OpenAI’s Codex in its first iteration. Elon Musk's xAI Launches New Grok Feature to Extend AI-Generated Videos and Enhance Creative Control for Users.

As the tech sector at large navigates a period of downsizing, with 60 companies laying off 38,645 employees already in 2026, xAI is moving in the opposite direction. The company is actively attempting to "build muscle" by swapping its early-stage founding team for specialists better suited to the scale and technical rigour required to compete at the frontier of AI development.

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(The above story first appeared on LatestLY on Mar 15, 2026 03:18 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).