San Francisco — Elon Musk’s artificial intelligence startup xAI has laid off approximately 500 employees from its data annotation division, marking a significant restructuring move aimed at refocusing the company’s resources on domain-specific expertise. The layoffs, which occurred late on Friday, September 12, 2025, were communicated via email and affected generalist AI tutors responsible for training Grok, xAI’s flagship chatbot known for its irreverent and unfiltered tone.
The data annotation team, xAI’s largest, played a critical role in contextualizing and categorizing raw data to help Grok generate accurate and engaging responses. Employees were informed that they would be compensated until the end of their contracts or November 30, but access to internal systems was terminated immediately. Slack accounts of several senior staffers were reportedly deactivated over the weekend, and some employees were called into one-on-one review meetings to justify their contributions.
The restructuring follows growing internal concerns over the scope and ethics of data annotation tasks. Earlier this year, reports surfaced that some annotators were asked to scan their faces to support AI training, a request that sparked discomfort among staff.
In a public statement on X (formerly Twitter), xAI emphasized that the layoffs were part of a strategic pivot and announced plans to expand its specialist AI tutor team by tenfold. These new hires will focus on domain-specific areas such as STEM, finance, medicine, and chatbot safety, including “red teaming” Grok and refining its personality modules.
The shake-up comes amid leadership changes at xAI. Mike Liberatore, the company’s chief financial officer, resigned in late July after only a few months in the role, adding to uncertainty about the company’s long-term stability.
Founded in 2023, xAI was launched with the goal of challenging dominant AI players like OpenAI, Google, and Anthropic. Musk has positioned Grok as a bold alternative to mainstream chatbots, criticizing what he sees as excessive censorship and weak safety standards in the industry.
While the layoffs have raised concerns about morale and operational continuity, xAI maintains that the transition to specialist tutors will accelerate Grok’s development and improve its performance. The company continues to recruit across multiple domains as part of its recalibrated strategy.
