Elon Musk’s artificial intelligence company xAI has laid off 500 employees from its data annotation division. These staffers, known as “generalist AI tutors,” were responsible for training Grok, the company’s flagship AI chatbot. The move is part of a major restructuring aimed at sharpening xAI’s focus on specialist AI tutors who can provide domain-specific expertise.
The layoffs, first reported by Business Insider, came as a shock to employees, who were informed via email late on Friday (September 12, 2025). Workers were assured pay until November 30, but immediately lost access to internal systems. Reports also revealed that the accounts of several senior staffers were deactivated over the weekend.
Why xAI is replacing generalists with specialists
Data annotators played a crucial role in Grok’s growth, feeding the system training examples, evaluating answers, and classifying information to improve performance. Many earned between USD 35 and USD 65 per hour. However, xAI is now moving away from generalists to hire domain experts, claiming it will “grow the specialist tutor team by 10X.”
This shift follows concerns earlier this year when tutors said they were asked to scan their faces for AI training purposes, a controversial request that made some uneasy.
Musk’s tough management style
Several ex-employees revealed they had been called into one-on-one review meetings and were asked to justify their value to xAI. This grilling style reflects Elon Musk’s well-known demand for accountability, similar to his leadership approach in Tesla and even during his brief involvement in U.S. politics.
Leadership changes add to uncertainty
Adding to the flux, Mike Liberatore, xAI’s finance chief, quietly resigned at the end of July after just a few months in the role. Leadership churn has been a recurring theme across Musk’s companies, often signalling big strategic shifts.
Future of Grok and AI race
Launched in 2023, xAI positions itself as a rival to OpenAI, Google, and Anthropic. Its chatbot Grok is famous for its witty, sometimes sarcastic personality. By focusing on specialists, Musk hopes Grok will become more accurate, safe, and competitive.
Still, with layoffs and executive exits, questions remain about whether xAI can maintain momentum in the fast-moving AI race.