Billionaire Elon Musk has merged his artificial intelligence startup xAI with his rocket company SpaceX, implementing a comprehensive management overhaul ahead of what could become the largest initial public offering in history.

The reorganization, announced on Wednesday, follows the recent departures of several co-founders from the three-year-old AI firm. These exits have reduced the original team of 12 co-founders by half, raising questions about stability as Musk pushes for head-to-head competition with industry leaders OpenAI and Google.

"We are restructuring because we have reached a certain scale. We are organizing the company to be more effective at this size. Naturally, when this happens, some individuals are better suited for the early stages of a company and less so for the later phases," Musk stated during an xAI all-hands meeting, according to video clips the company posted on X.

The announcement came after co-founders Tony Wu and Jimmy Ba posted on social media this week that they had resigned from the AI company they helped Musk establish.

According to data from Similarweb in January, traffic to xAI's chatbot website, Grok.com, has been growing steadily but remains a distant third globally. It accounts for just 3.4% of AI chatbot traffic, while ChatGPT and Google's Gemini command 64.5% and 21.5%, respectively. During the all-hands meeting, Musk outlined plans to build a comprehensive AI company that will compete in large language models, image and video generation systems, and coding tools, as xAI works to catch up with its rivals. He and other executives noted that the company is aggressively recruiting talent as competition for top AI researchers intensifies.