Elon Musk’s startup, xAI, just cut down its biggest team by a third.

The AI startup laid off at least 500 workers on its 1,500-person data annotation team on Friday night, reports Business Insider. The move means the team, which leads AI training, is down to about 1,000 workers. The group is tasked with refining xAI’s chatbot, Grok, by teaching it how to contextualize data.

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The company asked the team’s employees to complete a series of tests on Thursday night that would help classify them based on their strengths and interests. The tests covered areas like coding, finance, and medicine. More than 200 employees completed the tests, which had a Friday morning deadline, per BI.

On Friday night, xAI notified some employees on the team that they were being laid off via email that said the company was looking for more “specialist AI tutors,” with deep knowledge of disciplines like science, technology, and finance, and cutting back its employment of “general AI tutor roles” without that specialized knowledge. Generalist AI tutors take on a range of broader tasks, like annotating videos and writing assignments.

Related: Elon Musk’s xAI Is Reportedly Set to Hire Thousands of ‘AI Tutors’ With Pay Up to $65 an Hour

“This strategic pivot will take effect immediately,” the email, which was obtained by BI, read. “As part of this shift in focus, we no longer need most generalist AI tutor positions, and your employment with xAI will conclude.”

Workers were told that they would lose access to company systems immediately, but that they would still be paid their salaries through either the end of their contract or Nov. 30.

Amidst the layoffs, xAI is still hiring: The startup recently advertised for open positions for specialist AI tutors. In a post on X last week, xAI wrote that it was planning to “immediately” grow its specialist team tenfold and was “hiring across domains” like medicine and finance.

Specialist AI tutors at xAI are adding huge value. We will immediately surge our Specialist AI tutor team by 10x!

We are hiring across domains like STEM, finance, medicine, safety, and many more. Come join us to help build truth-seeking AGI!https://t.co/htpc2RijLG

— xAI (@xai) September 13, 2025

xAI has been rapidly growing its data annotation team. Since February, the startup has added about 700 employees to the group. According to xAI’s website, compensation for AI tutor roles can range from $45 to $100 per hour. The company had listed 13 open AI tutor positions at the time of writing.

The xAI layoffs follow several senior-level departures from the startup, including the company’s former Chief Financial Officer Mike Liberatore, who left at the end of July. That same month, xAI launched Grok 4, its most advanced model yet, calling it the “most intelligent model in the world” with high performance on benchmark tests.