Bearish news strikes! Late at night, a massive plunge! 437 billion yuan evaporated overnight, what's wrong with the AI giants?

AI Giants Reported Massive Layoffs!

On Friday local time, in the U.S. stock market, Meta’s stock price plunged nearly 4%, with a single-day market value erasing $61.9 billion (about 437 billion RMB). The company’s total market capitalization shrank to $1.55 trillion, approximately 10.69 trillion RMB.

That day, there were reports that, to cope with the surge in AI costs, Meta is planning to cut jobs by 20% or more. As of the end of last year, Meta had nearly 79,000 employees.

Meanwhile, Elon Musk’s xAI is also going through a turbulent period. Multiple co-founders have left one after another. Among the 12 co-founders, only two are currently staying on. In addition, the highly watched AI agent project Macrohard (“Big Hard”) at xAI has reportedly fallen into a standstill.

Meta May Cut at Least 20% of Its Workforce

According to Reuters, multiple insiders said that Meta is planning large-scale layoffs, with the potential impact ranging up to 20% or more of the company’s total headcount. The move is intended to offset the high spending on AI infrastructure and prepare for a transition after AI-assisted tools improve work efficiency.

According to the report, the insiders said that the specific date for the layoffs has not yet been determined, and the final scale has not been finalized either. Two insiders said that Meta’s senior leadership has recently communicated the layoff plans to other senior managers, asking them to begin formulating reduction plans. In response to the report, Meta spokesperson Andy Stone said, “This is speculative reporting about theoretical plans.”

If the layoff ratio Meta has determined is 20%, it would be the largest personnel adjustment for Meta since the “Efficiency Year” reorganization from late 2022 to early 2023. Based on the latest financial report, as of December 31 last year, the company had nearly 79,000 employees in total. In November 2022, Meta laid off 11,000 employees (about 13% of the total number of employees at the time), and about four months later it announced the elimination of another 10,000 positions.

Over the past year, Meta CEO Mark Zuckerberg has continued to push Meta to strengthen its competition in the field of generative AI. The company offered huge compensation to attract top AI research talent to join a new superintelligence team, with some packages reaching hundreds of millions of dollars for a four-year term.

Meta plans to invest $6000 billion in building data centers by 2028. Earlier this week, it just acquired Moltbook, a social platform targeting AI agents. Meta has also spent at least $2000 million to acquire China’s AI startup Manus.

Zuckerberg has hinted that these investments will bring efficiency improvements. In January this year, he said he has seen, “projects that previously required large teams can now be done by a single outstanding individual.”

Meta’s plans reflect a common trend among large U.S. companies this year—especially tech companies—where executives view near-term improvements to AI systems as one of the drivers of change. In January, Amazon confirmed layoffs of about 16,000 employees (about 10% of its workforce). Last month, fintech company Block cut nearly half its employees, and its CEO Jack Dorsey explicitly mentioned that AI tools help companies achieve higher output with leaner teams.

As Meta advances its AI investments, its Llama 4 model suffered a series of setbacks last year, including criticism that the early version’s benchmark test results were misleading. The company abandoned the largest version it had originally planned to release in the summer, “Behemoth.” This year, the superintelligence team has been working to build a new model called “Avocado” to re-establish the company’s position, but the model’s performance has also fallen short of expectations.

xAI Under Elon Musk Faces Major Turmoil

Elon Musk, the world’s richest man and CEO of Tesla, has an AI startup under his umbrella—xAI—which is currently experiencing turmoil. Not only have co-founders left one after another, but its Grok chatbot has also sparked controversies on multiple fronts. Musk has acknowledged that the company needs to undergo a deep restructuring.

Less than six weeks after SpaceX and xAI completed a $1.25 trillion merger transaction, Musk admitted that the AI startup needs to be “rebuilt from the ground up.” As he posted this statement on the social platform X, multiple xAI co-founders left in succession. On Thursday, xAI co-founder Guodong Zhang announced his departure, and Haotian Liu, a colleague who worked closely with him, also said on the same day that he had left earlier this week.

Out of xAI’s 12 co-founders, only two remain. Regarding this situation, Musk said at an all-hands meeting in February that some people are “more suitable for the company’s early stage rather than the later stage.” However, reports indicate that some departing engineers are jointly launching new projects, a move that reflects deep internal contradictions within xAI. Media citing insiders said that SpaceX and Tesla management had been asked to review the work of xAI employees and had already dismissed some of them.

On the evening of the 12th Eastern Time, Musk posted on social media X: “xAI wasn’t built well the first time, so we are currently starting from scratch and thoroughly rebuilding. Tesla went through the same situation back then.”

However, due to the departure of Toby Pohlen, the xAI co-founder leading the project, the highly anticipated AI agent project Macrohard (“Big Hard”) was reportedly stalled this Wednesday.

This wave of personnel shake-ups at xAI is happening as SpaceX prepares for a potential IPO of historic significance. In the merger deal announced recently, SpaceX is valued at $1 trillion and xAI at $250 billion. Meanwhile, on the one hand, the company is bringing in new engineers from startups like Cursor, including Andrew Millich and Jason Kingsberg; on the other hand, it is cutting jobs after observing the rapid progress of OpenAI and Anthropic’s programming tools. Musk also admitted that some excellent candidates were missed during the hiring process and said he is re-reviewing past job applications to rebuild connections.

xAI is also facing multiple controversies related to the Grok chatbot and image generators. The tool is accused of being able to create synthetic images with non-consensual implications based on real photos. Despite the ongoing disputes, the company has still managed to secure contracts with U.S. government agencies and continues to invest in energy and data infrastructure in Memphis and other places. Tesla is deepening cooperation by integrating Grok into in-car systems and providing energy storage devices for xAI data centers.