Elon Musk’s artificial intelligence company xAI abruptly laid off at least 500 workers from its data annotation division on Friday night, marking one of the sharpest pivots yet in its effort to refine Grok, the company’s flagship chatbot.
The move, focused on replacing generalist AI tutors with domain-specific specialists, mirrors Musk’s earlier approach at Twitter (now X), where he slashed headcount soon after taking over in 2022 and refocused operations around a smaller core team.
Emails sent to employees and reviewed by Business Insider confirmed the restructuring.
Register for Tekedia Mini-MBA edition 19 (Feb 9 – May 2, 2026): big discounts for early bird.
Tekedia AI in Business Masterclass opens registrations.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register for Tekedia AI Lab: From Technical Design to Deployment (next edition begins Jan 24 2026).
“After a thorough review of our Human Data efforts, we’ve decided to accelerate the expansion and prioritization of our specialist AI tutors, while scaling back our focus on general AI tutor roles. This strategic pivot will take effect immediately,” the email read. “As part of this shift in focus, we no longer need most generalist AI tutor positions and your employment with xAI will conclude.”
Affected staff were told they would remain on payroll until the end of their contracts or November 30, but their access to company systems was cut off immediately.
Cutting the Backbone of Grok
The layoffs struck at xAI’s largest team. Annotators have played a central role in Grok’s training, teaching the model how to contextualize raw data and categorize information for human-like responses. Before the layoffs, the main Slack channel for annotators counted more than 1,500 members. By Friday evening, screenshots showed that the figure had dropped to just over 1,000 and continued to fall as accounts were deactivated.
After publication of the layoffs, an xAI spokesperson pointed to a company post on X announcing plans to “surge our Specialist AI tutor team by 10x,” with openings in areas such as STEM, finance, medicine, and safety.
“Specialist AI tutors at xAI are adding huge value,” the company said, linking to its careers page.
A Week of Signals
The decision capped off a turbulent week. Days earlier, several senior-level employees, including the head of the annotation unit, had their Slack accounts deactivated. Workers were then told to expect a team reorganization.
On Thursday night, newly appointed leader Diego Pasini — who joined xAI in January and is currently on leave from his undergraduate studies at the Wharton School of Business — instructed staff to complete tests to determine their fit for specialist tracks.
The assignments covered traditional fields like coding, STEM, and finance, as well as Grok-specific areas such as “personality and model behavior” and even “shitposters and doomscrollers.” Some tests focused on chatbot safety, including “red teaming,” while others assessed skills in audio and video annotation.
Pasini’s post asked annotators to complete at least one test by Friday morning. More than 200 workers marked the message with a green check emoji, while over 100 left questions and comments. One worker criticized the late-night timing: “Doing this after people have gone home for the day is pretty shady.” That employee’s Slack account was deactivated soon after, multiple workers said.
Musk’s Management Playbook
The sudden downsizing and sharp pivot recall Musk’s early days at Twitter. After acquiring the platform in late 2022, he laid off thousands of employees — including engineers, content moderators, and product managers — and leaned heavily on smaller teams tasked with specific missions. The strategy, while controversial, was designed to cut costs and concentrate resources on projects Musk deemed vital.
At xAI, Musk appears to be repeating the formula, betting that a leaner, specialist-heavy workforce will push Grok closer to his stated goal of building “truth-seeking” artificial general intelligence.
A Wider AI Industry Divide
The layoffs also highlight diverging strategies among leading AI developers. OpenAI, Anthropic, and Google DeepMind continue to rely heavily on broad annotation workforces, often supplemented by external contractors in Africa, Asia, and Eastern Europe. These generalist annotators handle wide-ranging tasks such as content moderation, labeling, and basic language training.
But xAI’s pivot suggests Musk sees diminishing returns in that model. By doubling down on domain specialists — from medicine to finance to safety — xAI is prioritizing higher-quality, expertise-driven training data. Proponents believe this will help reduce hallucinations and boost performance in critical, high-stakes fields. Critics counter that the company risks losing the breadth of data and human context that generalist annotators provide.
For xAI, the gamble is to cut costs, streamline teams, and scale up expertise. The risk is equally apparent. Shedding hundreds of annotators means shedding institutional knowledge of how Grok has been shaped to date. Whether the 10x surge in specialists can offset that loss remains to be seen.