Some executives said they left because they were concerned xAI’s financial projections were unrealistic.

Several senior executives at xAI have left the company after clashing with two of Elon Musk’s closest advisers over the startup’s governance and financial health, according to people familiar with the matter.

Two advisers, Jared Birchall and John Hering, run day-to-day operations at xAI, while Musk, as CEO, makes the final decisions. Some internal executives have expressed concerns about how Birchall and Hering are running the company on Musk’s behalf, and feel that xAI lacks a formal chain of command.

Several executives said they left because they were concerned that xAI’s financial projections were unrealistic. They also questioned the role of Musk’s family office, Excession, in managing the company’s cash flow and accounting.

“The allegations of opaque financial data are false and defamatory,” Musk’s attorney, Alex Spiro, said in a statement. He said xAI’s financial statements were audited by PricewaterhouseCoopers. A source close to xAI said the company is confident in its financial projections.

Wave of leadership leaving

In recent months, several senior executives have left xAI, including Linda Yaccarino (former CEO of X), Mike Liberatore (chief financial officer), Igor Babuschkin (former Google researcher, co-founder of xAI), and Robert Keele (chief legal counsel).

The conflicts within the executive board reflect Musk’s “unconventional” approach to corporate governance, and show that it is making it difficult for his ambition to build the world’s leading AI company.

An xAI spokesperson asserted that Musk “leads xAI with an unwavering vision and commitment to making it a top priority to develop AI for the benefit of humanity.”

Financial and reputational pressures

xAI has made progress in developing strong AI, but it has struggled to compete with rivals like OpenAI and Anthropic, which have more paying customers. The company is spending heavily on graphics processing chips and data center infrastructure, raising concerns among former executives and investors about its financial health.

The company also suffered a reputational blow when its chatbot Grok spread violent and anti-Semitic content on social media, forcing xAI to publicly apologize.

Birchall, a longtime leader of the Musk family office, has played a central role in xAI efforts, raising money from investors like Andreessen Horowitz and Fidelity. Hering’s Vy Capital fund has also invested in xAI.

The conflict was so intense that Antonio Gracias – CEO of Valor Equity Partners, an early Tesla investor and xAI supporter – had to meet with the company’s leadership to mediate. However, Spiro denied this information, calling it a “complete fabrication”.

Valor has become more involved in supporting xAI since several executives left, the source said. Gracias has also been involved in crisis management at Tesla and Musk’s 2022 acquisition of Twitter.

Massive capital raising

Since its founding two years ago, Musk has built a massive data center in Memphis and raised more than $15 billion, promising to create the world’s smartest AI. In March, he merged xAI with social media platform X, where the Grok chatbot answers users’ questions. Musk claims the combined company is valued at $113 billion.

To stay in the race, xAI needs to continue raising capital as data center spending continues to grow. Musk has said that computing power is key to winning the “AI war.” The company is currently building a second data center in Memphis with about 550,000 Nvidia Blackwell chips to power Grok.

Sources close to the matter say Musk’s wealth and large investors will ensure xAI has enough capital to meet its long-term needs.

xAI had previously limited its ability to take on new debt after raising $5 billion in debt through Morgan Stanley. It also received $2 billion from SpaceX and is in talks with Tesla to invest at least $2 billion.

Spiro continued to deny financial difficulties: “The idea that xAI has had problems raising capital is completely false and defamatory – investment demand always far exceeds supply.”

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