Elon Musk Vows Full Rebuild of xAI Amid Co-Founder Exodus as SpaceX IPO Looms

Elon Musk announced on X that his artificial intelligence venture xAI requires a complete foundational rebuild after admitting critical structural mistakes, just as multiple co-founders continue to exit the company. The departures of Zihang Dai and Guodong Zhang this week follow exits by Jimmy Ba, Tony Wu, and Toby Pohlen in recent months, significantly depleting founding talent ahead of SpaceX's anticipated stock market debut.

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.

Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free.