xAI sues engineer for taking Grok secrets to OpenAI

PLUS: China’s AI race, and Nvidia’s two mystery whales

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Gen AI Art
September 02, 2025 • Estimated Reading Time: 9 minutes

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The rivalry between Elon Musk's xAI and OpenAI has escalated dramatically, moving from a war of words to the courtroom. xAI is suing a former engineer for allegedly stealing trade secrets related to its Grok model and delivering them directly to its chief competitor.

The lawsuit highlights the extreme measures companies are taking to guard their proprietary tech. As the talent war for top AI researchers intensifies, will legal battles become the new normal in the race for AI dominance?

Today in AI:

  • xAI sues engineer for taking Grok to OpenAI

  • China’s different AI race

  • Nvidia’s two mystery whales

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What’s new? Elon Musk's xAI is suing a former engineer for allegedly stealing trade secrets related to its Grok model and taking them to rival OpenAI, dramatically escalating the feud between the two AI powerhouses.

What matters?

  • The lawsuit alleges the engineer, downloaded confidential files containing technology with features superior to those offered by ChatGPT and then tried to cover his tracks by deleting logs.

  • According to the filing, the engineer accepted a position at OpenAI in July, sold $7M in xAI stock, and resigned shortly after allegedly transferring the confidential data to personal devices.

  • xAI is seeking an injunction to block the engineer from working at OpenAI or any other competitor, alongside a request for monetary damages for the alleged theft.

Why it matters?

This lawsuit intensifies the already fierce talent war and rivalry between xAI and OpenAI. It also highlights the critical importance of intellectual property as AI labs compete to build the next generation of models.

What’s new? While Silicon Valley chases the AGI moonshot, China is executing a different national strategy, focusing on practical applications to boost its economy right now.

What matters?

  • This strategic pivot is partly a response to US trade restrictions on advanced chips, making it harder for Chinese companies to compete on scaling large models.

  • Instead of chasing AGI, the focus is on building practical, low-cost AI tools that are already improving weather forecasts, grading exams, and running automated factories.

  • Beijing is backing its vision with an $8.4B investment fund and promoting open-source models, making it cheaper for companies to build and deploy AI solutions.

Why it matters?

If the West's AGI efforts don't deliver soon, China could gain a massive head start with its widely deployed, practical AI infrastructure. This pragmatic, open-source approach is also expanding China's AI influence across the globe.

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What’s new? A recent SEC filing reveals two unnamed customers drove a staggering 40% of Nvidia's revenue last quarter, signaling an unprecedented concentration of demand for AI chips.

What matters?

  • The filing shows one customer accounted for 21% of total revenue and the second accounted for 19%, both within its Compute & Networking segment.

  • This extreme concentration highlights the immense purchasing power of a few major cloud providers and big tech companies building out their AI infrastructure.

  • While showcasing incredible demand, this reliance on just two clients also raises questions about Nvidia's market risk if either customer reduces spending.

Why it matters?

The AI arms race is being funded by a very small number of ultra-wealthy players, giving them immense influence over the future of the technology. This underscores how critical the chip supply chain is and why the competition to control it has become a central geopolitical issue.

Everything else in AI

ByteDance released USO, an open-source model that can apply new artistic styles to images while preserving the original subject.

Researchers published a study on an AI-powered stethoscope that doubled heart failure detection rates and significantly increased diagnoses of other conditions in a trial of over 12,000 patients.

Aurasell raised $30M in a seed round to build its AI-powered sales platform aimed at competing with CRM incumbents like Salesforce.

Bumble's CEO sees AI chatbots as future dating coaches that will help users communicate better and build healthier relationships.

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