xAI is under mounting competitive pressure after co-founders Zihang Dai and Guodong Zhang departed this week.

The exits follow criticism from Elon Musk, who expressed concern that the company’s AI coding tools were falling short against rivals Claude Code and Codex, developed by Anthropic and OpenAI, respectively.

“xAI was not built right first time around, so is being rebuilt from the foundations up,” Musk said Thursday on his social media platform, X.

Musk said xAI held an all-hands meeting on Wednesday to discuss strategies for closing the gap, predicting the company could catch up by mid-2026.

An early-year surge in xAI users was fueled by the company’s loose moderation of Grok, which allowed the generation of sexual and even abusive content.

However, AI coding tools are considered the primary revenue drivers for AI labs, making xAI’s lag in this area a tangible business concern rather than just a perception issue.

The company’s personnel shake-up has been ongoing. About a month ago, 11 senior engineers, including two co-founders, departed following a reorganization that Musk described as necessary to scale the business for larger operations.

The Financial Times reported that executives from SpaceX and Tesla have stepped into xAI to assess staff and remove employees who do not meet performance standards.

The company’s two remaining co-founders, Manuel Kroiss and Ross Nordeen, along with Elon Musk, face the challenge of stabilizing the team amid the shake-up.

Musk is now broadening recruitment efforts to attract new talent and strengthen the company’s workforce.