xAI Layoffs Feb 2026: Musk Reorg Hits Co-Founders (55)

Elon Musk’s xAI, the ambitious AI startup aiming to rival OpenAI and Google in the high-stakes U.S. AI race, is undergoing a significant reorganization in February 2026—complete with layoffs and high-profile departures—that highlights the intense pressures facing even well-funded players in the sector.

The shake-up follows xAI’s merger with SpaceX and comes ahead of a potential blockbuster IPO later this year. On February 11, Musk confirmed on X that the company had been reorganized “to improve speed of execution,” a move that “unfortunately required parting ways with some people.” This restructuring, announced shortly after a SpaceX integration, has led to confirmed layoffs and a wave of exits, including senior engineers and co-founders.

Key details from reports (including TechCrunch and InformationWeek coverage around February 11): At least 11 engineers publicly announced departures in recent days, with two more co-founders—Yuhuai (Tony) Wu (reasoning lead) and Jimmy Ba (research/safety lead)—resigning this week via gracious X posts. This brings the total to six out of xAI’s original 12 co-founders who have now left, half the founding team gone (with several exits in the past year). Musk framed the changes as necessary for scaling, noting at an all-hands that some people suit early-stage companies better than later phases, though he clarified the departures weren’t all voluntary.

Despite the cuts, xAI—now with over 1,000 employees—plans to hire aggressively in core areas to maintain momentum in the race for advanced models like Grok.

Internally, xAI leverages its own AI tools aggressively for optimization: automated code generation, review pipelines, and efficiency workflows that help maintain high output even as teams slim down. This mirrors broader AI startup trends where internal LLMs and agents handle routine engineering and research tasks, allowing leaner operations amid rapid iteration.

Looking ahead, the reorganization positions xAI for focused execution in a hyper-competitive landscape—doubling down on breakthroughs in reasoning, coding, and multimodal capabilities—while preparing for IPO-scale growth. Musk’s vision ties AI tightly to SpaceX ambitions, potentially including lunar or space-based data infrastructure.

The picture remains balanced. On one side, this is classic startup evolution: restructuring for speed and alignment as the company matures beyond its scrappy founding phase, especially post-merger. On the other, the rapid talent exodus—particularly of key co-founders and engineers—carries risks. Losing institutional knowledge in critical areas like reasoning and safety could slow progress or create continuity gaps at a time when rivals are pouring resources into talent wars. Public announcements have been amicable, but the pace has fueled speculation about internal tensions, milestone pressures, or fit issues in a high-intensity environment.

In the broader 2026 AI startup landscape, xAI’s moves reflect the sector’s volatility: massive funding meets relentless competition, with AI enabling efficiency gains that sometimes lead to targeted downsizing rather than blanket growth. For talent, it underscores the need for adaptability—those building frontier models or integrating AI at scale will find opportunities rebounding quickly.

Author: Alex Rivera, San Francisco-based tech journalist with 15+ years

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