Observed Signal · Jun 18, 2026 · Public Statement · Source: CNBC Technology · Impact: 4/5 · Sentiment: Negative
Yann LeCun Calls Musk’s xAI a 'Failure'
Yann LeCun, founder of AMI Labs and former chief AI scientist at Meta, told CNBC that Elon Musk’s xAI is "kind of a failure" and unlikely to compete with frontier AI companies such as OpenAI and Anthropic. LeCun said xAI has lost founding talent and is struggling to attract top AI researchers, and he pointed to large rented infrastructure (Colossus 1 and Colossus 2) as a cost burden. He warned AI labs risk a "big bubble explosion" unless they cut costs or raise prices, noting many providers lose money on current LLM economics. The article also notes AMI Labs raised $1 billion in March to pursue "world models," SpaceX merged with xAI in February in a deal valuing the company at $1.25 trillion, and SpaceX’s AI segment reported a $2.5 billion operating loss in the quarter ended March 31.
Comments come from a highly influential AI researcher and touch on talent, infrastructure economics, major players (xAI/SpaceX, OpenAI, Anthropic) and funding — factors that can affect valuations, compute markets and strategic direction across the AI ecosystem.
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Key Takeaways & Evidence Grounding
- Yann LeCun said xAI is "kind of a failure" and unlikely to compete with OpenAI and Anthropic.
- LeCun warned AI labs may face a "big bubble explosion" if they do not cut costs or raise prices.
- AMI Labs raised $1 billion in March to work on "world models" and had a pre-money valuation reported at $3.5 billion.
- Elon Musk merged SpaceX with xAI in February in a deal valuing the company at $1.25 trillion.
- SpaceX's AI segment (including xAI) posted a $2.5 billion loss from operations for the quarter ended March 31.
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xAI Overhaul: Musk Rebuilds Amid Co-Founder Exodus
Elon Musk said xAI "was not built right first time around" and is being rebuilt from the foundations up, comments that follow a wave of departures by early xAI co‑founders. Several named founders and researchers — including Zihang Dai, Guodong Zhang, Jimmy Ba, Tony Wu and Toby Pohlen — have left recently. The report notes Musk merged SpaceX and xAI in a deal he valued at $1.25 trillion and that Tesla agreed to invest $2 billion tied to a previously announced $20 billion funding round for xAI. xAI’s chatbot and image tool Grok faces international government investigations over misuse (including non‑consensual image generation), even as xAI builds large data‑center and power infrastructure in the U.S. SpaceX is preparing for a potential IPO later this year while hiring engineers from startups such as Cursor.
Musk's xAI Reboots Amid Co‑Founder Exodus
xAI is undergoing a major personnel overhaul as it attempts to rebuild its deep‑learning lab to better compete with Anthropic and OpenAI. This week co‑founders Zihang Dai and Guodong Zhang left after Elon Musk criticized xAI’s coding tools for lagging behind rival assistants such as Claude Code and Codex. Only two of the original 11 co‑founders, Manuel Kroiss and Ross Nordeen, remain. Musk says xAI is being rebuilt “from the foundations up.” New hires include Andrew Milich and Jason Ginsberg from Cursor, while the Macrohard project — an xAI initiative Musk says is joint with Tesla to pair an LLM with Tesla’s humanoid agent — has been reported on pause. SpaceX and Tesla executives have reportedly been involved in evaluating xAI staff as the company pushes to show product and revenue progress.
Last xAI Co‑Founders Leave the Company
Two remaining co‑founders of Elon Musk’s AI startup xAI — Manuel Kroiss and Ross Nordeen — have left the company, according to Business Insider and reporting cited by TechCrunch. Kroiss led xAI’s pretraining team; Nordeen was described as Musk’s "right‑hand operator" and reportedly joined xAI from Tesla. The departures follow Musk’s comment that xAI "was not built right the first time around" and is being rebuilt from the ground up. xAI was recently acquired by SpaceX, consolidating SpaceX, xAI and X (formerly Twitter) under a single corporate umbrella. Reports also indicate SpaceX is planning a public offering. TechCrunch reached out to xAI for comment.
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