500 employees laid off by Elon Musk's xAI, here's why

Business News: Elon Musk's artificial intelligence company xAI laid off 500 employees from its data annotation team on Friday night. This team used to train the company's generative AI chatbot, Grok. According to a report, the employees who were fired were informed about this through email on Friday night. In this email, it was stated that the company will now focus more on specialist AI tutors while reducing the focus on general AI tutors and will expand the team in this direction.

What was written in the layoff email

The email said, "After a thorough review of our human data efforts, we have decided that we will rapidly expand and prioritize specialist AI tutors, while reducing the focus on general AI tutor roles. This strategic change will come into effect immediately."

Specialist AI tutors at xAI are adding huge value. We will immediately surge our Specialist AI tutor team by 10x!

We are hiring across domains like STEM, finance, medicine, safety, and many more. Come join us to help build truth-seeking AGI!https://t.co/htpc2RijLG

— xAI (@xai) September 13, 2025

It further wrote, "As part of this change, we no longer need most generalist AI tutor positions. Therefore, your job at xAI ends here." The email also informed employees that their access to company systems would be discontinued immediately. However, they would receive pay until November 30 or the end of their contract. Focus on specialist AI tutors. Soon after the layoffs, xAI announced that it would increase the size of the specialist AI tutor team by 10 times. The company wrote in a post on September 13, "Specialist AI tutors are proving to be extremely valuable to xAI. We are immediately expanding our specialist AI team by 10x." According to the company's website, new specialist AI tutors will be recruited, which will include experts from video games, web design, data science, medicine, STEM and other fields. There was a mess earlier too

A previous report by Business Insider revealed that last week the Slack accounts of many senior employees were deactivated without any prior notice. This created a state of confusion and dissatisfaction in the team.

Why is this decision important

This move by xAI shows that the company's focus is now on such AI models that can provide better training and performance in specific areas. Instead of general AI tutors, now such specialists, who can directly train AI models in depth in a particular subject, will be given priority. This layoff indicates a major change in the direction and strategy of the company. However, the sudden layoff of 500 employees has definitely created dissatisfaction among the employees.