Elon Musk's artificial intelligence startup, xAI, has spent months attempting to persuade corporate clients to use its Grok chatbot to accelerate programming workflows. However, according to sources familiar with the matter, even Musk's own employees are sometimes reluctant to do so. Some engineers at SpaceX have been slow to adopt Grok for technical tasks, finding it less effective than competing tools. Within the xAI division itself, some staff reportedly use other AI alternatives, such as Anthropic's Claude, for programming instead of Grok.
AI programming tools, which can streamline coding and debugging processes, have become a significant revenue source for xAI's competitors. The hesitation among Musk's employees to use Grok indicates the product still faces a considerable challenge in building market credibility, let alone achieving industry leadership. These challenges have prompted Musk to make what could be one of his boldest catch-up bets to date.
On Tuesday, SpaceX, Musk's commercial space giant which acquired xAI earlier this year, announced it had reached an agreement securing the right to acquire AI programming startup Cursor for $60 billion later this year. Alternatively, it could pay $10 billion for collaborative projects. SpaceX stated this high-cost partnership aims to develop the "world's best AI for programming and knowledge work."
xAI has developed an advanced, though often controversial, chatbot powered by data from Musk's social platform X. However, Grok has yet to prove its capability in programming, a breakthrough that is crucial to alleviating investor concerns that xAI could drag down SpaceX's valuation ahead of its anticipated initial public offering in June. The acquisition of xAI by SpaceX prior to the IPO is reportedly a major point of contention for the listing.
As a new entrant in the large language model arena, xAI is in a phase of intense research and development investment, with monthly operational losses exceeding $300 million. Its net loss surpassed $4 billion in 2025, with no clear path to profitability in the short term. There is widespread market concern that after the acquisition, xAI's substantial cash burn will be consolidated into SpaceX's financial statements, diluting the profitability of Starlink and potentially creating a scenario where a public company subsidizes Musk's personal ventures, harming public shareholders. This is considered one of the biggest uncertainties surrounding the SpaceX IPO.
Simultaneously, the xAI team has been pitching Grok to major Wall Street institutions and U.S. government agencies, promoting its use for internal operations and generating performance reports by scraping company data. However, this pitch has been hampered by concerns over the chatbot's shortcomings in programming and financial modeling, according to some sources. In finance, most Wall Street banks and asset managers either use proprietary AI models or tools from companies like Anthropic, making it difficult to persuade them to switch.
Regarding government use, several agencies are utilizing various AI models, including Grok, following a partnership established between xAI and the General Services Administration. A spokesperson for the U.S. Department of Agriculture stated the agency is deploying Grok as one of its AI tools.
Within Musk's corporate ecosystem, the uses for xAI's chatbot extend beyond programming. For instance, Starlink has integrated Grok into its customer service platform, and Tesla Motors is using the technology in its electric vehicles. SpaceX also has a version of Grok named Spok. Nevertheless, adoption in professional domains remains slow.
Sources indicate that some senior executives at xAI have instructed staff to accelerate the development of a product similar to Claude, capable of handling not just programming tasks but also generating presentations and spreadsheets. Musk himself has acknowledged that xAI is "behind" in programming and, following a round of layoffs and staff departures—including nearly the entire founding team—has promised a comprehensive restructuring to improve competitiveness. In a March post on X, Musk stated, "xAI was not built correctly the first time, so we are rebuilding it from the ground up."
To facilitate a turnaround, xAI has begun large-scale hiring for its engineering and training teams, including recruiting two senior employees from Cursor last month. The company also appointed Michael Nicolls, a senior executive from Starlink, as President of xAI. However, some insiders note that the ongoing cycle of layoffs and hiring has created confusion among staff, with the company's strategic direction for programming and other projects frequently shifting.
Furthermore, while Cursor has become one of the fastest-growing startups in history and a key player in the tech industry's "vibe coding" era, it too faces intense competition. The company offers its own proprietary models while also integrating others to avoid over-reliance on any single model provider's technology.
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