Elon Musk boards Air Force One at Joint Base Andrews in Maryland. (The New York Times)Elon Musk’s xAI is poised for a major transformation as it faces a wave of employee departures amid intensifying competitive pressures from rivals such as OpenAI and Anthropic.“xAI was not built right first time around, so is being rebuilt from the foundations up,” Musk said Thursday in a post on his social media platform, X. The tech billionaire reportedly held an all-hands meeting at xAI last week to discuss how the Grok maker can catch up by the middle of this year.xAI was co-founded by Musk and a team of 11 others roughly three years ago. Now, only two of those original co-founders remain. Currently, xAI reportedly has just over 5,000 employees, compared to more than 7,500 at OpenAI and more than 4,700 at Anthropic.A few weeks ago, xAI co-founders Zihang Dai and Guodong Zhang left the company reportedly after Musk complained that xAI’s coding tools were not as effective as rival programming assistants such as Anthropic’s Claude Code and OpenAI’s Codex. In February, several xAI senior engineers, including two co-founders, exited the company following changes Musk described as a reorganisation to suit a larger business.Earlier this year, xAI was acquired by Musk-led SpaceX earlier this year, in a record-setting deal that aimed to meet the AI developer’s costs largely driven by chips, data centres, and energy. Since the mega-merger, SpaceX and Tesla employees have been brought into xAI to conduct employee evaluations and fire under-performing staffers, as per a recent report by Financial Times.Is xAI in trouble?xAI began this year with a surge of new users that were mostly driven by the company’s relatively lax approach to safeguarding Grok’s capabilities, drawing the ire of regulators around the world after the AI chatbot was used to generate non-consensual sexual imagery of people, including minors in some cases.While Grok AI chatbot’s user base is fast-growing, xAI has not yet managed to capture the large share of enterprise demand for AI coding tools, programming assistants, automation plug-ins, and more. Enterprise AI is a valuable area that could lead to recurring revenue, and xAI is under pressure to show results externally as well because it is now a part of SpaceX.Story continues below this adAlso Read | Sam Altman vs Elon Musk: Why OpenAI’s CEO says space-based data centres won’t matter this decadeWith a public offering of SpaceX shares anticipated, investors are unlikely to look kindly on a cash-burning unit.However, Musk has projected confidence in xAI’s ability to turn things around. “xAI will catch up this year and then exceed them all by such a long distance in three years that you will need the James Webb telescope to see who is in second place,” he wrote in response to a post on X by a user who claimed that Anthropic, Google, and OpenAI are all tied for the top spot in the AI race, while Mark Zuckerberg’s Meta and Musk’s xAI were both seven months behind each.How does xAI plan to catch up?For starters, xAI is on the lookout for AI talent. Musk said that his team is currently reviewing rejected employment applications in the company, with an eye toward reaching out to promising candidates who should have had a chance to interview.Andrew Milich and Jason Ginsberg, who led product engineering at AI coding startup Cursor, are reportedly joining xAI. Beyond coding tools, xAI is also looking to create an AI agent capable of doing anything a white-collar worker can do on a computer.Story continues below this adAlso Read | Despite new curbs, Elon Musk’s Grok AI chatbot at times produces sexualised imagesLast week, Musk announced a joint project between Tesla and xAI called “Macrohard” or “Digital Optimus”. The objective is to reportedly develop an AI system capable of emulating the functions of software companies by pairing xAI’s frontier model, acting as a high-level navigator, with a Tesla-developed AI agent that processes real-time computer screen video and keyboard and mouse actions.