Elon Musk reorganizes xAI into SpaceX, and the Grok controversy combined with the departure of the founding team sparks a major upheaval in the AI landscape?

Elon Musk announced on X that his artificial intelligence company xAI has begun organizational restructuring and “needs to part ways with some employees” to improve operational efficiency. He did not disclose the scale of layoffs or specify whether departures are voluntary or involuntary, but emphasized that the company is still hiring, indicating that xAI will continue to advance its core products and computing infrastructure.

This adjustment comes amid ongoing turbulence within xAI’s founding team. Co-founders Jimmy Ba and Tony Wu confirmed their departure this week. Previously, several core members including Igor Babuschkin, Kyle Kosic, Christian Szegedy, and Greg Yang had also left. The team changes are happening concurrently with strategic shifts.

More notably, last week Musk announced that SpaceX completed its acquisition of xAI through a record all-stock deal. According to public documents, after the merger, SpaceX’s valuation is approximately $1 trillion, while xAI’s valuation is around $250 billion. Currently, xAI owns and operates the social platform X, and is also developing the Grok chatbot and image generation systems. Musk had previously acquired X through xAI, with the transaction finalized in March 2025 in the form of stock.

While rapidly integrating on the capital front, xAI also faces regulatory pressures in multiple regions. Authorities in Europe, Asia, and the United States are investigating whether Grok involves the unauthorized generation and dissemination of explicit images, including content involving minors, potentially violating multiple data and content compliance red lines. This risk adds uncertainty to xAI’s commercialization and international expansion.

Industry experts believe that integrating xAI into SpaceX signifies Musk’s effort to build a super-technology matrix spanning aerospace, social platforms, and artificial intelligence, aiming to create a closed loop in computing power, data, and applications. However, the loss of founding team members and regulatory scrutiny pose challenges to this path. Whether xAI can maintain its footing in the competition with OpenAI and Google will depend on governance, product safety, and its ability to adapt to global regulations.