FILE PHOTO: Open AI and xAI logos are seen in this illustration taken on September 12, 2025. REUTERS/Dado Ruvic/Illustration/File Photo

By Blake Brittain

(Reuters) -Elon Musk's artificial intelligence startup xAI has sued rival OpenAI in California federal court for allegedly stealing its trade secrets to gain an unfair advantage in the race to develop AI technology.

The lawsuit filed Wednesday said that OpenAI was engaged in a "deeply troubling pattern" of hiring away former xAI employees to gain access to trade secrets related to its AI chatbot Grok.

"OpenAI is targeting those individuals with knowledge of xAI’s key technologies and business plans—including xAI’s source code and its operational advantages in launching data centers—then inducing those employees to breach their confidentiality and other obligations to xAI through unlawful means," the lawsuit said.

Spokespeople for the companies did not immediately respond to requests for comment on the complaint on Thursday.

xAI said it discovered the alleged campaign to undermine the company while investigating allegations of trade secret theft against former engineer Xuechen Li, who it has accused of taking confidential information to the ChatGPT maker in a separate lawsuit.

Li has not yet responded to the allegations.

xAI has separately sued Apple in federal court for allegedly conspiring with OpenAI to suppress rival platforms. Apple has not yet responded to the lawsuit.

Musk is also suing OpenAI over its conversion to a for-profit company, while OpenAI has countersued Musk for harassment.

xAI's new lawsuit is part of a broader legal battle between Musk and OpenAI, which he co-founded, and underscores a high-stakes race in Silicon Valley to hire AI-related talent and gain market share in the burgeoning industry.

According to the complaint, OpenAI hired away former company engineer Jimmy Fraiture and an unnamed senior finance executive in addition to Li in order to obtain xAI trade secrets. Fraiture, who is not a defendant in the complaint, could not immediately be reached for comment.

(Reporting by Blake Brittain in Washington; Editing by Chizu Nomiyama and Deepa Babington)