At the beginning of this week, it seemed that AI startup Cursor was heading toward closing a funding round of $2 billion at a valuation of $50 billion. A few hours later, SpaceX announced that it had secured the right to buy Cursor for $60 billion or pay the company $10 billion for a partnership. Investors who were preparing to sign the agreements learned the news from media reports. Not from Cursor’s founders.
Cursor was playing two games at once. While finalizing a funding round with investors including Nvidia and Battery Ventures, it was secretly negotiating with SpaceX over a potential acquisition. This is nothing unusual in Silicon Valley. But this time, the two storylines converged at almost exactly the same moment. According to TechCrunch sources, the funding round was essentially complete. It could have closed within days. SpaceX arrived at the last minute with an offer that brought the entire process to a halt.
Why did Cursor accept the offer? $2 billion would not have been enough for the company to become profitable. Cursor would soon have had to seek more capital to cover its enormous computing costs. SpaceX’s offer eliminated that concern.
Microsoft looked, but did not buy
Before SpaceX stepped in, Microsoft also expressed interest in Cursor. According to two CNBC sources, the American software giant considered a potential acquisition but ultimately made no offer. Microsoft has its own tool for programmers, GitHub Copilot, which surpassed 4.7 million paying users last year and is growing 75% year over year. Even so, it is lagging behind Cursor, Anthropic, and OpenAI in AI coding.
Microsoft shares have lost roughly 10% this year, and while its rivals celebrated the AI boom, Microsoft mostly watched from the sidelines. Cursor essentially slipped right through its fingers.
Cursor is an AI programming platform
Cursor, a four-year-old startup, develops AI tools that help programmers write and fix code. The product is called Composer, and developers love it. The company reports more than $1 billion in annual recurring revenue, a milestone reached in November last year.
The valuations of startups such as Cursor resemble a race. In January 2025, the company was valued at $2.5 billion. In May of the same year, it was $9 billion. In November, after closing a Series D funding round, it exceeded $29 billion. And today, the right to buy Cursor costs $60 billion. Meanwhile, Cursor faces increasingly fierce competition. Anthropic launched Claude Code, while OpenAI has Codex. New competitors emerge every month.
SpaceX merged with xAI and is heading for the stock market
In February this year, Elon Musk merged SpaceX with his AI company xAI in a transaction that he estimated at $1.25 trillion. He is now preparing an initial public offering that could be the largest in history. The target valuation is around $1.75 trillion, and Cursor fits perfectly into this plan. SpaceX is not yet perceived as an AI company. Stock market investors give AI companies significantly higher valuation multiples than companies that launch rockets and operate satellites. By acquiring Cursor, SpaceX wants to prove that it is also a serious AI company.
However, the acquisition itself will not happen immediately. An acquisition of this size would require the financial documents filed ahead of the initial public offering to be revised, delaying the entire process. SpaceX will therefore wait until it is publicly traded, after which it will be able to pay with its own shares.
Benefits for both Cursor and SpaceX
The agreement includes Cursor’s access to the Colossus supercomputer operated by xAI in Memphis. This machine has computing power equivalent to one million Nvidia H100 graphics cards. Until now, Cursor has struggled with a shortage of computing capacity that has slowed the development of its models.
On its blog, Cursor wrote: “Every step up in computing power has translated into significantly more capable models.” Thanks to this agreement, they will be able to make an enormous leap forward.
SpaceX, meanwhile, is gaining a team that neither Google nor Microsoft acquired. Unlike Google’s handling of its Windsurf acquisition, which was primarily about recruiting key people, SpaceX reportedly intends to keep the entire Cursor team together. And that makes sense. Musk’s company does not yet have a meaningful AI foundation of its own that it could pitch to the stock market.
Sam Altman announced this week that OpenAI Codex surpassed 4 million active users less than two weeks after exceeding three million. Anthropic reached $30 billion in annualized revenue this month, largely thanks to Claude Code. SpaceX is now entering this race with Cursor as its main card. We will find out later this year whether it ultimately keeps that card or discards it for $10 billion.
Sources: cnbc.com, theguardian.com
