Musk's xAI Loses Another Co-Founder as Talent Exodus Accelerates

Tony Wu becomes latest xAI co-founder to resign amid deepfake controversies and regulatory probes. Half of original founding team has left the $250B AI startup.

The $250 billion AI darling is hemorrhaging its founding talent, and the latest departure tells a story bigger than just another resignation.

Tony Wu, co-founder of Elon Musk's xAI, announced his resignation Monday night in a post that felt more like a manifesto than a goodbye. "It's time for my next chapter," Wu wrote, describing an era where "a small team armed with AIs can move mountains and redefine what's possible."

The irony? He's leaving the very company that was supposed to embody that vision.

The Founding Exodus

Wu joins a growing list of original xAI architects heading for the exits. Igor Babuschkin, Kyle Kosic, and Christian Szegedy have already departed. Greg Yang announced last month he's stepping back to battle Lyme disease.

That's nearly half of the original 12-person founding team gone or going—in just three years.

For a company that launched with the grandiose mission to "understand the true nature of the universe," xAI seems to be struggling with understanding its own talent retention.

The Deepfake Scandal

The departures come as xAI faces a consumer and regulatory reckoning. The company's Grok AI chatbot and image generator enabled mass creation of non-consensual, explicit deepfake images—including of children—based on real people's photos.

Multiple countries have launched regulatory probes. Consumer backlash has been swift and severe. For a company positioning itself as the ethical alternative to OpenAI and Google, the scandal represents a fundamental credibility crisis.

The $1 Trillion Contradiction

Here's where the story gets truly bizarre: Wu's resignation comes just days after Musk announced that SpaceX would acquire xAI in what he called "the largest merger of all time." The deal values SpaceX at $1 trillion and xAI at $250 billion.

Musk had already merged xAI with X in a multibillion-dollar deal last March. Now, with the SpaceX acquisition, he's creating an unprecedented tech conglomerate spanning social media, space exploration, and artificial intelligence.

The Small Team Paradox

Wu's farewell message praised the power of "small teams armed with AIs." Yet he's leaving a company that's becoming anything but small—one that's now part of Musk's sprawling empire of interconnected businesses.

The question isn't just about xAI's future, but about the nature of innovation itself in the age of mega-mergers and regulatory scrutiny.