Elon Musk’s artificial intelligence company, xAI, has laid off around 500 employees from its largest division, the data annotation team responsible for training the company’s Grok chatbot, according to Business Insider.

Mass Layoffs Hit Data Annotation Team

Staff members received email notifications on Friday night confirming that the company was downsizing its AI tutor workforce. These workers were tasked with organizing and labeling raw data, which is crucial for improving Grok’s performance and understanding.

Although the affected employees will continue to be paid until their contracts expire or until November 30, 2025, their access to internal systems was immediately revoked.

Leadership Changes at xAI

The layoffs come shortly after the departure of xAI’s finance chief, Mike Liberatore, who left in late July after just a few months in the role, The Wall Street Journal reported. His exit, combined with the staff cuts, has fueled speculation about the company’s long-term direction and stability.

Musk’s Ambitious AI Vision

Launched in 2023, xAI was created by Elon Musk as a direct competitor to Big Tech’s AI companies, which he has criticized for promoting censorship and weak safety standards.

The company’s flagship product, Grok, was pitched as a bold alternative, an AI assistant focused on open dialogue and “truth-seeking” responses.

However, the recent restructuring suggests that xAI is rethinking its development strategy, cutting costs, and streamlining operations as it seeks to compete in the fast-moving AI landscape.