Musk's SpaceX bets $60 billion on Cursor to fix xAI's coding gap
Key Points
- SpaceX has secured an option to buy AI coding startup Cursor for $60 billion. If the deal falls through, SpaceX will pay a $10 billion breakup fee.
- Cursor is betting the agreement will give it the compute capacity it urgently needs. Going forward, the company plans to scale its in-house models using the infrastructure of xAI, the SpaceX-controlled AI firm.
- For Elon Musk, the planned acquisition fills a gap at xAI, which has been trailing competitors like OpenAI and Anthropic on coding tools.
SpaceX has secured an option to buy AI coding startup Cursor for $60 billion. The deal would fill a gap Elon Musk's xAI has struggled to close on its own: coding tools.
Elon Musk's rocket and satellite company SpaceX has struck an unusual agreement with AI coding startup Cursor. According to a SpaceX post on X, the company has secured an option to acquire Cursor later this year for $60 billion. If the deal falls through, SpaceX will pay a $10 billion breakup fee, The Information reports.
The acquisition would more than double Cursor's valuation, which most recently stood at $27 billion. A planned funding round led by Thrive Capital and Andreessen Horowitz at a $50 billion valuation was halted as part of the deal.
Compute for coding expertise
In a blog post, Cursor is upfront about the reason: a shortage of compute. Training its own Composer models had been held back by limited compute capacity. By tapping into xAI's Colossus infrastructure, which SpaceX controls following its takeover of xAI, Cursor plans to dramatically scale up the intelligence of its models. CEO Michael Truell calls the deal a major step toward building the best place to code with AI.
Cursor was founded in 2022 by four MIT alumni and grew to $100 million in annual recurring revenue in under two years. But the company has come under pressure lately as Anthropic's Claude Code picked off more and more customers. Cursor tried to fight back with a stronger agent focus in Cursor 3 and its own in-house model. That model, however, turned out to be a tweaked version of China's Kimi K2.5.
For Musk, the deal fills a hole xAI hasn't been able to patch on its own. xAI lags behind OpenAI's Codex and Anthropic's Claude Code on coding performance and tooling, and it's been losing talent. Back in March, xAI poached two former Cursor execs, Andrew Milich and Jason Ginsberg. The company is currently training several new Grok models.
SpaceX had already absorbed xAI in an internal merger in February 2026, valuing the combined company at $1.25 trillion. An IPO is planned for June.
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