AI researchers are now regularly being poached for hundreds of millions of dollars, but not all these moves are without controversy.
xAI has sued former engineer Xuechen Li for allegedly stealing its confidential technology, and then attempting to take it to OpenAI where was supposed to join earlier this month. xAI says that Li unexpectedly cashed out on a large amount of his xAI stock, and immediately resigned. He then allegedly copied confidential xAI information to his personal laptop, and then tried to cover his tracks by deleting his browser history and other logs. xAI claims that the technology that was stolen would’ve enabled OpenAI to create a product superior to ChatGPT.
Xuechen Li had completed his PhD in Computer Science from Stanford in 2024, and was among the 20 earliest employees at xAI. He was working on developing and training Grok, xAI’s advanced AI model.
In June 2025, Li had sold stock worth $4.7 million of his shares in xAI for $4.7 million. He wanted more liquidity, so xAI purchased an additional $2 million of shares from him the next month. “xAI facilitated this transaction for Defendant because xAI valued his contributions, and wanted to retain him as a productive and successful employee,” xAI said in the lawsuit.
Li allegedly received the cash proceeds of this sale on July 25, 2025. xAI alleges that the very same day, Li copied xAI’s “confidential Information” and “trade secrets” from his xAI-issued laptop to “non-xAI physical or online storage systems within his personal control”. xAI says that Li took “extensive measures” to conceal his misconduct, including deleting his browser history and system logs, renaming files, and compressing files before uploading them to his personal device.
xAI says that three days later after this alleged theft, Li resigned. He had already accepted an offer from OpenAI prior to this, and was slated to start working at OpenAI on 19th August. xAI discovered Li’s actions on August 11 during a routine review of logs from security software designed to detect and prevent data exfiltration. The same day, xAI emailed Li, asking him to return and delete the data. At this point, xAI says that Li hired a criminal attorney. During a meeting between xAI’s lawyers and Li’s lawyers, Li allegedly admitted to intentionally taking xAI’s files and covering his tracks. Li let xAI create copies of his personal laptops to examine them, but xAI alleges that he hasn’t given them the passwords for critical accounts that could indicate what exactly he’d stolen
“The trade secrets Defendant willfully and maliciously misappropriated include without limitation cutting-edge AI technologies with features superior to those offered by ChatGPT and other competing products,” xAI said. Musk is asking Li for an unspecified amount of monetary damages, and is seeking to block his move to OpenAI.
This risk of such an occurrence was always high in the high-stakes AI space. Researchers routinely move from lab to lab, and can often take billions of dollars of know-how with them. Silicon Valley famously doesn’t have non-competes in its employment contracts, so employees can legally take their learnings from one lab to another. What’s not allowed, however, is taking proprietary and confidential data from one lab to another. This is something that xAI alleges that Xuechen Li has done by copying its data on its his personal laptop, and presumably looking to take it to OpenAI. xAI and OpenAI have a fractious history, with Musk having previously sued OpenAI for looking to illegally change from a non-profit to a for-profit structure. And with allegations of data theft now also in the mix, the battle between xAI and OpenAI has just gotten spicier.