What are Elon Musk's plans for xAI now after co-founder exits and SpaceX merger?

Elon Musk has tore xAI down and stitched it straight into SpaceX.That’s where we are now.The so-called “reorganization” of the AI startup has already pushed out a pile of key names.

Jimmy Ba and Tony Wu, both co-founders, said they were leaving earlier this week. Before that, Igor Babuschkin, Kyle Kosic, Christian Szegedy, and Greg Yang had already packed their bags. Elon called it a cleanup “to improve speed of execution.” Sure. He also said, “We are hiring aggressively,” so apparently the purge was just step one.

This mess came right after SpaceX swallowed xAI in a giant all-stock deal. The merger, confirmed last week, valued SpaceX at $1 trillion and xAI at $250 billion. Elon didn’t mention layoffs, but he didn’t deny them either. “Parting ways” is how he put it.

xAI faces legal heat as SpaceX prepares for IPO

The exits and restructuring are landing while xAI is already under serious pressure.Investigators in the U.S., Europe, and Asia are looking into how its chatbot Grok ended up spreading explicit deepfake images of real people, including minors.

These images were made and pushed out at scale using xAI’s AI systems. Regulators are now digging into whether the company violated any laws in those regions. It’s the kind of legal mess that can wreck a public listing if not cleaned up fast.

Meanwhile, SpaceX is getting ready to go public. Elon wants to list the company later this year. The IPO could hit a valuation of $1.5 trillion, according to Bloomberg. Big banks are already in line to help. Bank of America, JPMorgan, Goldman Sachs, and Morgan Stanley are all expected to lead. And Robinhood, the same one that brought Gen Z into stock trading, is also fighting for a piece of the action.

The deal also wrapped xAI’s other assets under SpaceX, including the Grok chatbot and the social platform X, which Elon bought earlier in March 2025 using another all-stock transaction through xAI. Now that’s all under one roof, tied directly to SpaceX.

Elon started xAI in 2023, along with eleven other people. He said the goal was to “understand the true nature of the universe.” Not exactly small talk. At the time, it was meant to battle OpenAI and Google. That ambition still exists. But now xAI is a part of a bigger machine, one that’s also launching satellites, rockets, and maybe soon, IPO paperwork.

On the tech side, Elon wants to put AI data centers in space. The idea is for SpaceX to host computing power in orbit, with xAI tapping into that for large-scale AI processing. If the engineering holds up, it could be a major step.

The idea is to run AI data centers in space using Tesla energy systems and SpaceX rockets. Tesla’s energy storage would keep the power flowing through solar. Elon even said Starship could carry Tesla’s Optimus robots to the moon or Mars. Nobody knows exactly why, but he keeps talking about it.

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