Elon Musk’s AI startup xAI laid off approximately 500 employees from its data annotation team on Friday night, according to internal communications reviewed by Business Insider. The cuts, representing about one-third of the company’s 1,500-person data team, were part of a sudden “strategic pivot” aimed at shifting focus from generalist AI tutors to specialized AI tutors in areas like STEM, finance, medicine, safety, and other niche domains. Employees received emails stating that their roles as generalist AI tutors were no longer needed, and their employment with xAI would end immediately. The data annotation team is central to training xAI’s chatbot, Grok, as it prepares and labels vast amounts of raw data to improve the AI’s understanding and responses. The layoffs followed a series of internal changes, including the deactivation of senior employees’ Slack accounts just days prior. Workers were then asked to participate in a series of assessments on Thursday night, with a deadline to complete them by Friday morning. These tests, hosted on platforms like CodeSignal and Google Forms, evaluated skills in STEM, coding, finance, media, safety, and even more unconventional areas like “Grok’s personality and model behavior” and “shitposters and doomscrollers.” Diego Pasini, a recent addition to the team and newly appointed leader, announced the tests and requested employees to complete them to determine their future roles. Over 200 workers responded with green checkmarks, while many others raised concerns about the short notice, especially since the tests were sent out after work hours. One worker’s Slack account was deactivated shortly after expressing frustration, sparking concerns about retaliation. The number of active members in the main data annotation Slack channel dropped from over 1,500 to just over 1,000 by Friday evening, indicating a rapid reduction in team size. Despite the layoffs, xAI announced on X (formerly Twitter) that it would “surge” its specialist AI tutor team by 10 times, emphasizing new hiring across key domains. The company said it was expanding its focus on high-precision training to enhance Grok’s capabilities in complex fields. Pasini, who joined xAI in January and is currently on leave from the Wharton School at the University of Pennsylvania, did not respond to requests for comment. xAI confirmed the layoffs through a statement on X, reaffirming its commitment to growing its specialist team. The move reflects a broader trend in AI development, where companies are moving from broad, general data labeling to more targeted, expert-driven training. While this shift may improve AI performance in specialized areas, it has left many data annotators jobless and raises questions about workforce stability in the AI sector. The layoffs also highlight the volatile nature of early-stage AI startups, where rapid strategic changes can lead to abrupt workforce reductions. The incident underscores the growing tension between innovation and employee security in the fast-evolving AI industry. As companies like xAI scale their models, the demand for specialized expertise increases, but so does the risk of job cuts for support roles that are critical to development. The outcome of this pivot will likely influence how other AI firms approach data training and team management in the future.