Second xAI co-founder Tony Wu departs as Musk folds money-losing AI venture into SpaceX

After Igor Babushkin, another xAI co-founder has announced his departure. Tony Wu, who was responsible for developing the company's foundational models and reasoning capabilities, reported directly to Musk. He joined xAI from Google when the company was founded in 2023.

Wu is leaving after xAI recently allowed the creation of deepfake nude photos for weeks, only backing down under pressure from authorities. His departure likely has nothing to do with the controversies, though—the AI developer thanks Elon Musk for his support in his farewell post, referencing "all those battles we have fought together." Babushkin left xAI back in August 2025 and started his own AI safety fund. His departure followed several controversies around the xAI chatbot Grok, which drew attention for far-right statements, among other things.

The timing is still notable. SpaceX recently announced a takeover of xAI that values SpaceX at one trillion dollars and xAI at 250 billion dollars. The likely reason: xAI generates almost no revenue on its own, even though developing and running its models costs billions. Without major progress, xAI appears to have no clear path forward (but a ton of compute).