Elon Musk’s xAI Lays Off 500 Staff, Now Hiring 10X More Specialist AI Tutors

Elon Musk’s artificial intelligence startup, xAI, is once again making headlines with a dramatic restructuring move. The company has reportedly laid off around 500 employees from its data annotation team, a group instrumental in training Grok—xAI’s chatbot known for its sharp, irreverent style. But in an unexpected turn, Musk’s firm says it now plans to hire 10 times more specialist AI tutors, signaling a shift in priorities and sparking fresh questions about xAI’s long-term stability.

The mass layoffs, first reported by Business Insider, were communicated late on Friday via email. The employees affected were part of the so-called “generalist AI tutor” workforce, whose role was to contextualize and categorize raw data so that Grok could generate accurate, engaging responses. Many workers described the move as sudden, with Slack accounts of at least nine senior staffers reportedly deactivated over the weekend.

For those laid off, compensation was limited. Staff were told they would be paid until the end of their contracts, or at the latest until November 30, but their system access was cut immediately. Some of the employees hit hardest were senior figures within the human data management team, a 1,500-strong division central to Grok’s development. According to xAI’s careers page, their pay typically ranged between $35 and $65 an hour.

The shake-up even included managers with prior experience from Musk’s Tesla Autopilot program, underscoring just how deep the cuts ran.

What Data Annotators Do

At its core, data annotation is about helping AI understand human nuance. Annotators feed examples into the system, evaluate its responses, and classify information so the model gradually improves. Earlier this year, however, Business Insider reported controversies around the role—some workers were allegedly asked to scan their faces to support AI training, leaving many feeling uncomfortable.

Now, with the layoffs complete, reports suggest xAI is restructuring the tutoring process. Several employees said they were called into one-on-one meetings with supervisors, where they were asked to explain “what they’ve been working on and how they add value to xAI.” The hard-nosed evaluations mirror Musk’s reputation for tough management reviews.

Executive Departures Add to Uncertainty

The layoffs also come amid leadership changes. Just weeks earlier, The Wall Street Journal revealed that Mike Liberatore, xAI’s chief financial officer, departed at the end of July after only a few months in the role. Leadership turnover has long been a hallmark of Musk’s ventures, often coinciding with bold pivots in strategy.

Musk launched xAI in 2023 with an ambitious mission: to challenge the dominance of OpenAI, Google, and Anthropic while positioning Grok as an alternative to what he sees as Big Tech’s flaws—namely, “excessive censorship and lax safety standards.” Grok quickly became known for its witty, often unfiltered tone, distinguishing it from more cautious AI assistants.

Layoffs or Recalibration?

While the scale of the layoffs has rattled employees, Musk’s camp is framing the move as recalibration rather than retreat. xAI has declined to comment directly but pointed to a post on X (formerly Twitter), where the company stressed it is hiring across multiple domains and aims to expand its specialist AI tutor team by “10X.”

By reducing reliance on generalists and ramping up hiring of domain-specific experts, Musk’s strategy appears focused on accelerating Grok’s refinement and competing more effectively with rivals.

Still, for workers and industry watchers, the question remains: is this restructuring the start of stronger foundations, or another sign of turbulence within Musk’s newest venture?