1. Headline & intro
xAI’s latest crisis is not a bug in its models, but a bug in its governance. When more than half of a founding team walks away months before an IPO, the code smell is hard to ignore. In the past week, senior engineers and two co‑founders have publicly announced their departure from Elon Musk’s AI venture, just as the company faces regulatory heat over deepfakes and questions about Musk’s own judgment. In this piece, we’ll look beyond the Twitter drama and ask what this wave of exits really says about frontier AI labs, talent power, and whether xAI can be a long‑term rival to OpenAI, Anthropic and Google.
2. The news in brief
According to TechCrunch, at least nine engineers have recently announced they left xAI, including two co‑founders: reasoning lead Yuhai (Tony) Wu and research/safety lead Jimmy Ba. Most departures were posted on X between 6 and 10 February 2026, though at least two engineers said they had already left weeks earlier.
Several of the ex‑employees say they are starting new ventures together, without yet disclosing details. Others hinted they want smaller, more autonomous teams to build frontier technology faster.
This is happening while xAI is under regulatory scrutiny. Its Grok model generated non‑consensual explicit deepfakes of women and children that were widely shared on X, leading French authorities to raid X’s offices as part of an investigation. xAI was also just legally acquired by SpaceX and is reportedly preparing an IPO later this year. TechCrunch notes xAI still has more than 1,000 staff, so short‑term capabilities are unlikely to be hit, but co‑founder exits have intensified questions about the company’s stability.
3. Why this matters
Founders don’t leave just because of “normal churn.” When more than half of a founding team walks before an IPO, it usually signals one of three things: strategic misalignment, governance conflict, or a belief that the biggest upside now lies elsewhere.
At xAI, all three may be in play.
First, timing. xAI should be entering its consolidation phase: locking in senior talent, stabilising culture and preparing investors for a public listing. Instead, it is losing the people who helped define its technical direction and safety approach. That hurts institutional memory, but more importantly it weakens internal dissent. Co‑founders are usually the only ones senior enough to say “no” to a powerful CEO.
Second, the public hints from some leavers are revealing. Comments that “all AI labs are building the same thing” and that small teams “armed with AIs can move mountains” suggest frustration with a perceived convergence of big labs: huge transformer models, closed research, and incremental product features layered on top. When elite researchers feel the frontier has become “boring,” they have both the skills and capital access to try something different.
Third, this exodus lands amid reputational shock. Grok’s role in generating explicit deepfakes of women and children, and subsequent raids on X’s French offices, underline that xAI is not just shipping clever chatbots; it is operating in a space where ethical lapses trigger police investigations. Combine that with newly disclosed emails between Musk and Jeffrey Epstein, and you get a brand that is increasingly toxic for safety‑minded researchers.
The immediate winners are rival labs and new startups that can now recruit a highly concentrated pocket of frontier talent. The loser, at least in the short term, is xAI’s claim to be the “safety‑first” counterweight to OpenAI. You can’t credibly preach caution while your flagship model is feeding a deepfake crisis and your safety co‑founder walks out the door.
4. The bigger picture
These exits fit a broader pattern: frontier AI talent is increasingly unwilling to be just a cog in mega‑labs steered by charismatic billionaires with shifting priorities.
We’ve seen versions of this movie before. DeepMind’s early independence eroded after Google folded it tighter into the corporate stack; several senior figures ultimately left to launch new ventures. At OpenAI, the 2023 boardroom coup and reversal exposed deep tension between profit‑driven scaling and safety‑driven restraint. In both cases, the key fault line was governance: who really controls the direction of models that might shape entire economies.
xAI starts with an additional handicap: it is structurally entangled with Musk’s other projects and his personal brand. Being acquired by SpaceX may simplify fundraising and data‑centre build‑out, but it also blurs accountability. If Grok causes societal damage, is that on xAI, on SpaceX, or on X as the distribution platform? That ambiguity is exactly what regulators dislike.
Meanwhile, the frontier is shifting from “bigger models” to “agentic systems” and specialised tooling. Anthropic is leaning into AI “teams,” OpenAI is pushing agentic coding models, and Google is embedding Gemini across its product stack. In that context, xAI’s headline act, Grok, looks more like a strong but conventional general‑purpose model wired into X.
The comments from ex‑xAI staff about “100x productivity” and recursive self‑improvement loops in the near term may sound breathless, but they capture a real inflection: top engineers believe the tools they are building are now good enough that five or ten people can rival a historical 100‑person team. That re‑empowers the startup model and weakens the argument that only mega‑labs with tens of billions in compute can innovate.
In other words, what looks like a crisis for xAI may be an early sign that the AI talent stack is fragmenting away from a handful of US giants.
5. The European / regional angle
For Europe, the xAI turmoil lands at a strategically awkward but potentially useful moment.
On one side, EU institutions are finalising the AI Act and already enforcing the Digital Services Act (DSA) and GDPR. X is already under DSA scrutiny for disinformation and harmful content; now, the Grok‑powered deepfake scandal hands European regulators a concrete, high‑profile case where a general‑purpose AI model, a social network, and a controversial owner are tightly coupled. Expect the French raid on X’s offices to be just the beginning of coordinated regulatory pressure.
On the other side, Europe suffers from a chronic shortage of frontier AI talent and a persistent brain drain to US and UK labs. Every time a high‑profile US AI company sheds senior engineers, European scale‑ups and research labs should be on the phone. Berlin, Paris, Zürich and London are building credible AI clusters, and European funds have more dry powder for deep‑tech than at any point in the past decade.
There’s also a cultural dimension. European researchers and regulators are generally more sceptical of “move fast and break things,” especially when it comes to biometric surveillance, deepfakes and child safety. For safety‑oriented engineers who feel uneasy about Musk’s governance but still want to work on the frontier, continental Europe — with its stronger regulatory guardrails and public funding — becomes more attractive, not less.
For European users and enterprises, the lesson is simple: xAI‑powered products will not be judged only on model quality, but on how they interact with Europe’s strict liability and transparency rules. The deepfake episode is likely to harden regulators’ views on generative AI defaults, from watermarking to traceability obligations.
6. Looking ahead
In the next 6–12 months, expect three parallel storylines.
First, the "ex‑xAI" cluster. Several of the departing engineers explicitly said they are building something new together. If they secure funding — which is almost guaranteed given their résumés — we may see a lean, safety‑aware frontier lab or a highly focused agentic‑systems startup emerge. Watch for where it is headquartered: a choice of London, Paris, Berlin or Zürich would be a strong signal about Europe’s pull.
Second, xAI’s IPO narrative. Investors will ask why co‑founders walked just before a listing and how the company plans to prevent another Grok‑style scandal. Expect a glossy S‑1 filing emphasising scale ("1,000+ employees"), integration with X and SpaceX, and a redoubling of compliance language. The real question is whether xAI will strengthen internal governance — independent oversight, transparent safety processes — or rely on Musk’s personal brand and a loyal retail investor base.
Third, regulation catching up. The French investigation into deepfakes on X is unlikely to be the last. As the EU AI Act comes into force, providers of general‑purpose models will face stricter risk‑management and documentation duties. xAI’s integration with a platform already under DSA investigation makes it a natural early target for test‑case enforcement. That could translate into forced model changes, transparency orders, or even temporary feature suspensions in the EU.
The biggest open question is whether talent will continue to flow out of mega‑labs into smaller ventures, or whether this is a Musk‑specific story. If the ex‑xAI founders prove that a 10‑person team with the right tooling can rival the incumbents, the entire frontier AI landscape could decentralise quickly.
7. The bottom line
xAI’s co‑founder exodus is less about nine people changing jobs and more about what it reveals: governance fragility, reputational drag, and a growing conviction among top engineers that they can do better outside mega‑labs. For Europe, this is both a regulatory test case and a talent opportunity. The real question for readers — whether you are a policymaker, founder or engineer — is simple: in a world where small, well‑armed teams can "move mountains," who do you trust to own the next generation of AI infrastructure, and under what rules?
