Musk vows full to rebuild before SpaceX IPO after admitting xAI mistakes amid co-founder exodus

Only two of the 11 people who started xAI with Elon Musk in 2023 are still there. Merely a few weeks after Elon merged SpaceX and xAI in a deal he valued at $1.25 trillion, he admitted the AI company had problems from the start.

Writing on X (because of course), Elon said xAI “was not built right first time around, so is being rebuilt from the foundations up.” He posted that as more co-founders kept leaving the company that he launched to chase the AI race.

The latest departures came this week, when Zihang Dai and Guodong Zhang left. Before them, Jimmy Ba said last month that he was leaving and wrote, “Grateful to have helped cofound at the start.” Earlier, Tony Wu had already said he was out.

Toby Pohlen then left later in February. Those exits came after Tesla said a month earlier that it would invest $2 billion into xAI as part of a previously announced $20 billion funding round.

Now the company has far less founding firepower at a time when SpaceX is getting ready for a stock market debut that could become one of the biggest IPOs ever if it happens this year.

SpaceX prepares its IPO while Elon watches xAI lose founders

Amidst it all, SpaceX has already started lining up lawyers for the IPO process, hiring Gibson Dunn to represent it through the listing work just yesterday.

The banks expected to underwrite the deal picked Davis Polk & Wardwell as their legal adviser. That matters because companies usually bring in their own lawyers before they formally choose the investment banks that will lead the offering.

Of course, Gibson Dunn also advised SpaceX on its acquisition of xAI, so the same company is already tied to the merger that put both businesses under one roof.

At the same time, SpaceX has been interviewing major banks for leading roles on the offering. The names through the door [naturally] include Bank of America, Goldman Sachs, JPMorgan Chase, and Morgan Stanley. As you are probably tired of hearing, this IPO is expected to be one of the richest public listings ever for Wall Street.

Elon launches Project Macrohard, reopens old hiring files

Meanwhile, during the week, Elon also announced a supposed joint project between Tesla and xAI called “Macrohard” or “Digital Optimus.” The busy guy said the system could emulate the functions of software companies.

In his post on X, Elon said the project combines xAI’s Grok large language model, which acts as a high-level “navigator,” with a Tesla AI agent that reads real-time computer screen video and tracks keyboard and mouse actions.

He said the system would run on Tesla’s AI4 chip together with xAI’s Nvidia-based server hardware, and he described that setup as cost-competitive.

The project arrives as software investors worry that agentic AI could hit existing business models after the launch of Anthropic’s Claude Cowork, which can carry out a range of computer tasks on its own.

Elon said xAI had earlier been building Macrohard so developers could simulate software creation by companies such as Microsoft. He wrote, “In principle, it is capable of emulating the function of entire companies.

That is why the program is called MACROHARD, a funny reference to Microsoft.” Records from the U.S. Patent and Trademark Office show xAI filed a trademark application for “Macrohard” in August 2025.

Early Friday, Elon wrote, “Many talented people over the past few years were declined an offer or even an interview @xAI. My apologies.” He added that he and Baris Akis, who oversees engineering talent at xAI, were reviewing interview history and reaching back out to promising candidates.

All this is happening while Grok continues to face government investigations in multiple jurisdictions after users generated non-consensual sexual deepfake images of adults and children, and while xAI keeps spending billions on power and data infrastructure around Memphis and has now secured a Mississippi permit for one of the region’s largest natural gas turbine plants to supply its data centers.

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