xAI in Crisis: Musk Struggles Ahead of SpaceX IPO

The situation at xAI, Elon Musk's tech startup, is concerning as SpaceX prepares for a historic IPO. In February 2026, Musk merged xAI with SpaceX, forming a colossal entity valued at $1.25 trillion. This merger aimed to make xAI the technological engine of the Musk empire, with ambitious projects such as deploying data centers in orbit using Starship.

However, xAI is going through a turbulent period. Since the beginning of the year, the company has faced a talent exodus. Most of the co-founders have left the company, and many researchers are turning to more attractive competitors. The remaining staff expresses dissatisfaction with the constant upheavals. Additionally, the in-house chatbot, Grok, is struggling to gain traction in the market, further highlighting the company's commercial lag.

To try to turn things around, Elon Musk has called upon his loyal lieutenants from his other companies, as revealed by Bloomberg in an extensive investigation. Gwynne Shotwell, President and COO of SpaceX, has also been overseeing xAI's operations since the merger. Michael Nicolls, a former Starlink executive, took the presidency in April. Jared Birchall, Musk's personal wealth manager, and James Burnham, former legal advisor to the Department of Government Efficiency (DOGE), also hold key positions. None of them are AI specialists, but all are seasoned loyalists.

This strategy, while typical of Musk, poses significant risks for xAI. Competitors are advancing rapidly, recruiting top talent and developing new models at a brisk pace. Moreover, xAI consumes enormous amounts of cash, posing a financial risk to SpaceX and potentially cooling some investors' enthusiasm. To counter this, the company is looking to diversify its revenue by offering its computing infrastructure to third parties, but the race against time is on.