SpaceX has deal for right to acquire Cursor for US$60 billion

[NEW YORK] SpaceX said that it has an agreement giving it the right to acquire artificial intelligence startup Cursor for US$60 billion later this year or to pay US$10 billion for the companies’ work together, part of the Elon Musk-run firm’s efforts to catch up with rivals in AI coding tools.

Musk’s rocket, satellite and AI giant announced the deal in a post on X, saying the two companies are “now working closely together to create the world’s best coding and knowledge work AI”.

SpaceX recently merged with xAI, Musk’s AI company, which competes with Anthropic and OpenAI in creating generative AI tools for consumers and businesses. The deal comes shortly after Musk said that xAI is behind on software coding tools compared with peers and vowed to rebuild the company from the ground up. In March, he ordered a round of layoffs. He’s also been seeking engineering talent, and has previously hired from Cursor.

SpaceX is not acquiring Cursor immediately because of the rocket company’s imminent initial public offering, according to a source familiar with the matter, who asked not to be identified discussing non-public information. A major transaction would require the company to update its filings and financial details, potentially delaying the IPO, which is targeting a US$2 trillion valuation.

The US$10 billion is a breakup fee if the deal does not go through, according to sources with knowledge of the deal. SpaceX and xAI did not immediately respond to a request for comment.

Cursor had been in talks with investors to raise about US$2 billion in a funding round with a valuation of more than US$50 billion, not including the investment, Bloomberg reported last week. The company is no longer proceeding with the round, because the capital was set to fund Cursor’s computing needs, which are now being handled by xAI, according to a source familiar with the matter.

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Cursor’s AI assistant, launched in 2023, helps programmers write and debug code more efficiently. It’s become one of the fastest-growing startups of all time and a central player in tech’s “vibe coding” era, as demand surges among software developers for tools that can build based on prompts to a chatbot.

But coding with AI requires a lot of computing resources – something SpaceX has plenty of, with its massive data centres in Tennessee and Mississippi. The SpaceX team “has an enormous amount of compute and we think together we can scale up our model efforts and we’re really excited about it”, Cursor president Oskar Schulz said. “We really like their team.”

Cursor’s investors include Nvidia, Alphabet’s Google, OpenAI’s venture fund, Andreessen Horowitz, Thrive Capital, Accel and DST Global. BLOOMBERG