xAI executive turmoil: Conflict with Musk's advisor, multiple senior executives resign one after another

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Multiple sources revealed to the media that several executives at Elon Musk's AI startup xAI have recently resigned due to conflicts with two of Musk's close advisors over company management and financial health issues.

According to media reports, the two advisors are Jared Birchall and John Hering, who are responsible for xAI's daily operations, while Musk, as CEO, is in charge of final decisions. Some executives raised concerns internally, saying there was no clear division of authority when Birchall and Hering managed the company on Musk's behalf, according to informed sources.

Some executives told the media they chose to leave because they were concerned that some of the company's financial forecasts were overly unrealistic. They also raised internal questions, suspecting the role of Musk's family office Excession in handling certain cash and accounting matters.

Musk's lawyer Alex Spiro responded to the media via email, saying, "Any claims of impropriety regarding financial data are false and defamatory." He stated that the company's financial data is audited by PwC.

A person close to xAI told the media that the company has full confidence in its financial projections.

Internal Turmoil at xAI May Hinder Development

In recent months, several xAI executives have resigned, including former X CEO Linda Yaccarino, former CFO Mike Liberatore, former Google research scientist and xAI co-founder Igor Babuschkin, and xAI's general counsel Robert Keele.

Analysts believe that the executive conflicts within xAI highlight Musk's unconventional management style, which is impeding his ambition to build a world-leading AI company.

An xAI spokeswoman stated that Musk "leads xAI with unwavering vision and commitment, making the advancement of AI for the benefit of humanity the top priority."

Although Musk's xAI has made some progress in developing advanced AI, it continues to struggle in competition with industry leaders OpenAI and Anthropic, which have more paying users. The company has also invested heavily in GPUs and data center equipment, causing concerns among some former executives and investors about its financial situation.

The company's reputation was recently hit when its chatbot Grok spread violent and anti-Semitic content on social media, prompting a public apology from the company.

Media: Serious Disagreements Among Senior Management Require Intervention from Musk Allies

Among the recently departed advisors, Jared Birchall, who has long headed Musk's family office, played a key role in xAI's operations and fundraising, with investors including Andreessen Horowitz and Fidelity. Hering's own investment fund, Vy Capital, is also an investor in xAI.

According to sources, some executives' disagreements with Musk's advisors over company operations were so severe that Musk's ally Antonio Gracias had to step in to coordinate. Gracias is CEO and founder of Valor Equity Partners, an early investor in Tesla and a supporter of xAI. However, Spiro told the media that descriptions of Gracias "mediating fabricated disputes" are "entirely false."

Sources said that since a series of executive departures, Valor Equity Partners has played a greater role in assisting with xAI's management. In the past, Gracias has also stepped in during Tesla crises, such as production issues with the Model 3 and Musk's acquisition of Twitter in 2022. After ending his term with the government efficiency unit, he has become more actively involved in company affairs.

A spokeswoman for Valor stated:

"xAI is at a hyper-growth stage, which is, of course, challenging, but we are extremely excited about its trajectory and speed, which are extraordinary. xAI is performing well in research, team, infrastructure, and fundraising.

Most companies Valor serves are in high-growth phases; we are supporting Elon's deep personal commitment and his extremely hands-on leadership of the company."

xAI Continues Fundraising and Investment in Computing Power

Since founding xAI two years ago, Musk has built a large data center in Memphis, Tennessee, and raised over $15 billion, pledging to develop the world's smartest AI. In March this year, he merged xAI with his social platform X, and the Grok chatbot now provides answers to users on X. Musk stated that the merged company is valued at $113 billion.

To catch up with competitors, the company must continue fundraising and make massive investments in data centers. Musk has said that computing power is the key to winning the AI race. The company is building a second data center in Memphis, expected to deploy about 550,000 Nvidia Blackwell chips to power Grok.

A source told the media that the wealth of Musk and other major investors will help secure the company's long-term funding needs.

According to earlier media reports, a recent $5 billion debt financing arranged for xAI by Morgan Stanley has limited the company's future borrowing capabilities.

xAI has also received $2 billion in funding from another Musk company, SpaceX. Sources said that this summer, xAI representatives told some investors that the company was discussing an investment of at least $2 billion with Tesla.

Spiro said in an email:

"Claims that xAI has fundraising problems are completely false and defamatory—the investment demand far exceeds the available amount."

Tesla shareholders are expected to vote in November on a proposal that would allow the board to invest an unspecified amount in xAI. Musk has said that if it were up to him, Tesla would have already invested in xAI.

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