I get it; it’s not an easy time for a legacy automaker to be selling electric vehicles, what with incentives being gutted and Chinese automakers knocking at the door. But Honda is taking it to another level.

This week, Honda killed its paltry — and frankly unpromising — EV programs. What little motivation Honda had to compete in the EV arena is apparently gone, and along with it, any chance of surviving the current wave of disruption that’s sweeping the industry.

The company casts blame on U.S. tariffs and Chinese competition, two easy targets. But it never really had a viable EV strategy to begin with.

Honda kicked things off on Thursday by halting development of the electric Acura RDX and the Honda 0 sedan and SUV, three models that were the company’s first ground-up EVs — but about which very little was shared with outsiders. It continued on Friday, with Automotive News reporting that Honda was going to stop production of the Prologue, a vehicle that was essentially designed and entirely built by GM. 

The decision could backfire in a number of different ways, but there are two that I’d argue are most important. By shelving EVs, Honda will fall farther behind in two of the biggest shifts sweeping the automotive industry: electric drivetrains and software-defined vehicles.

Missed EV opportunities

To Honda — and to many legacy automakers still early in the transition— an EV is just a car with a different drivetrain. I can imagine Honda executives thinking that they can wait out the awkward transition period and, when motors and batteries are fully sorted, simply swap out the fossil fuel bits. How hard could it be?

That’s a mistake, of course. Many automakers have found that dropping batteries into a car originally designed for an internal combustion engine doesn’t work out so well. It might shortcut the development cycle, but the resulting product ends up heavy, inefficient, and more costly to produce.

When developed as an original product, EVs offer automakers a chance to rethink the automobile, and in the process, make it cheaper. 

Take Ford, for example. The Mustang Mach E has been a sales success, but not a financial one for Ford. The Mach E is based on a heavily modified version of the platform that also underpins the Escape, a fossil fuel crossover. Part of the problem, Ford CEO Chris Farley said in a recent interview, was that legacy engineering decisions held the product back: The Mach E’s wiring harness is 70 pounds heavier than Tesla’s, for example. Small errors like that compound themselves in a product as complex as an automobile.

Honda will also miss out on several learning opportunities. There’s learning by doing, both in development and manufacturing. There’s also learning to cultivate new suppliers and supply chains. It will also miss out on receiving critical customer feedback — what do people really value in their EVs?

Sayonara, software-defined vehicles

Here, Honda is setting itself up for failure on the second disruption sweeping the automotive industry: the software-defined vehicle (SDV), which has core capabilities that can be upgraded and improved over time.

Consumers, mostly those who buy EVs from the likes of Tesla, Rivian, and BYD, have grown accustomed to the frequent updates, slick infotainment software, and advanced driver assistance systems of Tesla, Rivians, Nio or Xiaomi. Honda has yet to make significant progress in any of those domains.

SDVs don’t have to be EVs, but they tend to go hand-in-hand. The large battery in an EV makes it easier to feed powerful computers, and it allows things like over-the-air updates to happen when the car is parked and “off.” Could Honda make a fossil fuel SDV? Sure, but it’s unlikely to for the same reason it’s backing away from EVs: the old way of doing things is easier and more profitable, for now.

What does Honda stand for?

Honda is facing an identity crisis. At its core, it’s an internal combustion engine company. It makes really good engines, and that’s starting to matter less and less. 

Other traits of its cars are also under assault. For years, the company has prided itself on making driver’s cars. They’re lightweight, efficient, and handle well. But when the car drives itself, what does a “driver’s car” even mean?

Putting autonomy aside, I’d argue that the market for a driver’s car is limited anyway. People are drawn to Honda because they’re reliable and reasonably priced. The fact that they handle well is icing on the cake, maybe helping consumers break a tie if they’re torn between two brands.

But EVs promise to be significantly more reliable than fossil fuel vehicles, and as Chinese automakers show, once battery prices come down, so do overall vehicle costs. If Honda can’t compete on reliability or price, consumers will balk.

That already appears to be happening in China. Honda said as much in its recent earnings report. “Honda was unable to deliver products that offer value for money better than that of newer EV manufacturers, resulting in a decline in competitiveness,” the company said. Headwinds in China contributed to the company’s nearly $16 billion losses last year. Without a plan for EVs, it’s only a matter of time before Honda suffers the same fate elsewhere.

And then there were two: Of the original 11 co-founders who kickstarted xAI with Elon Musk three years ago, only two remain as the deep learning lab continues a personnel overhaul to compete with Anthropic and OpenAI. That rebuilding, insists Musk, is by design.

“xAI was not built right first time around, so is being rebuilt from the foundations up,” Musk said Thursday on his social media platform, X. By most measures, it isn’t going all that smoothly.

The most immediate pressure is competitive. This week, xAI co-founders Zihang Dai and Guodong Zhang left the outfit after Musk complained that the company’s AI coding tools were not effectively competing with Claude Code or Codex, rival programming assistants made by Anthropic and OpenAI, respectively. Musk said the company held an all-hands meeting on Wednesday that focused on how to catch up, which he predicted would be possible by the middle of this year.

Coding tools matter so much because they’re where the money is. While an early-year surge of users was powered by xAI’s lax regulation of Grok’s ability to produce sexual and even abusive imagery, coding tools are seen as the key revenue-generating tech for AI labs. That makes xAI’s current lag in this area more than a perception issue; it’s a business problem.

The personnel overhaul extends well beyond this week. A month ago, 11 senior engineers at xAI, including two co-founders, left the company following changes Musk described as a reorganization to suit a larger business. That effort was apparently insufficient: The Financial Times reported that SpaceX and Tesla executives have parachuted into the company to evaluate employees and fire those who don’t make the grade.

The two remaining co-founders, Manuel Kroiss and Ross Nordeen, along with Musk, have their work cut out for them.

Musk is now casting a wider net for talent. On Thursday, he said on X that he and another colleage, Baris Akis, are currently reviewing rejected employment applications in the company, with an eye toward reaching out to promising candidates who should have had a chance to interview. “My apologies,” Musk added, addressing the pile of strangers he’d ghosted.

For the sake of comparison, LinkedIn reports that xAI has just over 5,000 employees, compared to more than 7,500 at OpenAI and more than 4,700 at Anthropic.

On the hiring front, there’s at least one encouraging sign. Andrew Milich and Jason Ginsberg are joining xAI from the AI coding tool company Cursor, where the two held joint responsibility for product engineering. Unlike xAI, Cursor depends on frontier labs for access to the AI models it runs on. Their decision to join xAI may signal the importance of direct access to LLM and computing resources to run them — and suggest that xAI’s core asset, its own frontier model, is still an attractive draw.

Either way, the pressure to show results is as much external as it is internal. Now that xAI is part of SpaceX, and with a public offering of SpaceX shares anticipated, the cash-burning unit is under pressure to demonstrate real uptake on Grok, its LLM. (A stumbling AI division is not the story Musk needs investors to be reading.)

Longer term, Musk is betting on something bigger than coding tools. xAI’s Macrohard project — Musk is convinced the name is “a funny reference to Microsoft” — aims to create an AI agent capable of doing anything a white-collar worker can do on a computer. Toby Pohlen, chosen to lead the project in February, left within weeks, and this week, Business Insider reported that Macrohard was on pause.

Musk’s response has been to draft another of his companies into the project. He revealed for the first time that Macrohard is a joint effort with Tesla, which is also developing a complementary agent dubbed “Digital Optimus” — a reference to Tesla’s Optimus humanoid robot. In Musk’s description, the xAI language model would direct the Tesla agent as it performs tasks.

It’s ambitious; it’s also not unique. Instead, the vision is not far off from what Perplexity — an AI-powered search engine — is doing with its new “Everything is Computer” offering, which aims to offer enterprise users a dedicated “digital proxy” that can orchestrate their digital tasks. It also echoes what entrepreneur Peter Steinberger is now working on at OpenAI, after creating OpenClaw’s popular personal agents.

Digg — Kevin Rose’s reboot of his once-popular link-sharing site — is laying off a sizable portion of its staff, the company announced on Friday. The startup is not closing, however, Digg CEO Justin Mezzell said. Instead, Rose will return to work on Digg full-time as the company tries to find its footing.

Rose will continue to work as an advisor at investing firm True Ventures, but will make Digg his primary focus from here on out.

The startup had set out to offer an alternative to existing community forums, where people could post and share links, media, and text, and engage in topical discussions. But while Digg had clever ideas on how to better moderate content and verify that users were who they claimed to be, the company admits it was overwhelmed by bots even in its earliest days.

Nodding to the “dead internet theory,” which claims today’s web is more bots than people, Mezzell describes the problem of combating bot spam in a post on the Digg website.

“When the Digg beta launched, we immediately noticed posts from SEO spammers noting that Digg still carried meaningful Google link authority,” the blog post about the layoffs states. “Within hours, we got a taste of what we’d only heard rumors about. The internet is now populated, in meaningful part, by sophisticated AI agents and automated accounts. We knew bots were part of the landscape, but we didn’t appreciate the scale, sophistication, or speed at which they’d find us.”

The company said it banned tens of thousands of accounts, deployed internal tooling, and worked with external vendors, but it wasn’t enough. For a site that relied on user votes to rank content, an uncontrollable bot problem meant those votes couldn’t be trusted.

“This isn’t just a Digg problem. It’s an internet problem,” Mezzell notes.

Mezzell also said that taking on established rivals (likely a reference to Reddit) was too hard, calling the competition not just a moat but a wall.

The company didn’t share how many people were affected by the layoffs, but said that a small team will continue to rebuild Digg as something “genuinely different.” The Digg app has been pulled from the App Store, and the layoff post is currently the only content on Digg’s website. The Diggnation podcast — a video show Rose hosts — will continue, however.

For context, Rose and Reddit co-founder Alexis Ohanian acquired what remained of the old Digg earlier last year, intending to build up a site where communities had more moderator and admin control and ownership. The deal was a leveraged buyout involving True Ventures, Ohanian’s firm Seven Seven Six, Rose and Ohanian personally, and the venture firm S32. Funding details weren’t made public.

Digg was not immediately available for comment.

Eighteen months after selling his startup to chipmaker AMD for $665 million, Finnish entrepreneur Peter Sarlin has left his role as CEO of the unit now known as AMD Silo AI. He is now chairman at two new ventures: physical AI lab NestAI, and QuTwo, an AI startup aimed at helping companies prepare for the era of quantum computing

Currently fully funded by Sarlin’s family office, PostScriptum, QuTwo describes itself as “an AI lab for the quantum era.” Rather than waiting for quantum computing to mature, however, it is already working with enterprise customers — including European fashion retailer Zalando, with which it is developing what the two companies call “lifestyle agents,” AI tools designed to go beyond product search and proactively suggest products and experiences.

QuTwo is built on the premise that AI is hitting an efficiency wall that quantum computing may eventually help solve. But the company is not betting on when that will happen, Sarlin told TechCrunch. Instead, the startup is building QuTwo OS as an orchestration layer that allows companies to shift from classical to quantum computing — making use of hybrid computing along the way.

Sarlin invested in Finnish quantum companies IQM and QMill through PostScriptum, and is one of a growing number of investors who believe it will eventually outperform classical computers in a wide range of industry applications while easing AI’s energy demands. But he also thinks that initial use cases will require mixed hardware environments, and that enterprises would rather focus on their business problems while QuTwo OS takes care of the routing.

In that respect, the potential advantage of the middle ground known as “quantum-inspired” computing is that it is already viable today, because it uses classical hardware while simulating quantum behavior, working around the hurdles that still hinder quantum hardware. Meanwhile, QuTwo OS is designed to be flexible, supporting quantum or non-quantum algorithms and chips alike.

QuTwo’s team brings experience on both sides of the quantum-AI divide. On the quantum side, there’s IQM cofounder Kuan Yen Tan and board member Antti Vasara, also chair at SemiQon, a Finnish semiconductor startup focused on quantum chips. The enterprise side is equally represented, by Sarlin himself and Kaj-Mikael Björk, one of his former cofounders at Silo AI. Pekka Lundmark, the former CEO of Finnish telecom giant Nokia, also joined QuTwo’s board.

Across both areas, the team counts over 30 quantum and AI scientists, and Sarlin is clear where the company stands. “We’re building for the quantum world, but QuTwo is an AI company,” he said, meaning that QuTwo is “pushing AI workloads from classical to quantum.”

This also means that its customer base could be quite broad. Beyond Zalando, QuTwo also launched a joint quantum AI research initiative with OP Pohjola, a major Finnish financial services provider.

From the outset, QuTwo has been commercially minded and already has “large design partnerships which are in the tens of millions,” Sarlin said. Design partnerships — in which a vendor co-develops its product alongside enterprise customers — are a way for QuTwo to learn what those customers expect as it builds its product. They are also a bet from enterprises looking to establish early footing when and if quantum computing does arrive.