Elon Musk’s artificial intelligence startup xAI has filed a federal lawsuit accusing former employee Xuechen Li of stealing proprietary technology before defecting to OpenAI. The suit, filed Thursday, identifies Li as a “Chinese national” and alleges he copied confidential data from his xAI-issued laptop shortly before resigning and joining the rival AI company.
According to court documents, Li was one of only 20 early engineers at xAI, with access to its core technology—reportedly including AI systems surpassing the capabilities of ChatGPT. On the same day Li received approximately $7 million in a cash equity payout, he allegedly downloaded sensitive company files to his personal system, renamed and compressed them, and deleted his browser and system history to cover his tracks.
xAI claims Li admitted both verbally and in writing to misappropriating proprietary data. He resigned on July 28, and was reportedly set to begin working for OpenAI on August 19. Despite signing a post-resignation declaration stating that he had returned all company property and would maintain confidentiality, xAI asserts those claims were false.
Musk is seeking a restraining order to prevent Li from working at OpenAI until the trade secret dispute is resolved.
The case has reignited controversy surrounding Musk’s longstanding support for the H-1B visa program, which allows foreign nationals to work in the United States. Musk, who has previously called critics of the visa system “contemptible fools,” has credited foreign workers from China and India for much of the success of Tesla and SpaceX. Critics now argue that such policies may present national security and intellectual property risks.
The lawsuit underscores growing concerns over foreign influence and the protection of cutting-edge American technology in the AI arms race.
