SpaceX Gets $60B Option to Buy Cursor for xAI Coding
SpaceX now holds an option to purchase the AI coding startup Cursor for $60 billion. This move aims to strengthen Elon Musk's xAI in the area of coding tools, where it has fallen behind rivals. A SpaceX announcement on X confirmed the option, set for later this year. The Information provided details on the agreement, which carries a $10 billion penalty for SpaceX should the acquisition not proceed.
The purchase price would push Cursor's value well above its latest figure of $27 billion. Negotiations for a funding round, led by Thrive Capital and Andreessen Horowitz at a $50 billion valuation, stopped as part of this arrangement.
Reasons Behind Cursor's Move
Cursor highlighted its compute shortages in a company blog post. Those limits slowed training for its Composer models. With the deal, Cursor expects to use xAI's Colossus setup. SpaceX took control of xAI through an earlier takeover. Cursor CEO Michael Truell described the partnership as a key advance in creating the top AI coding environment.
Founded in 2022 by four graduates from MIT, Cursor reached $100 million in yearly recurring revenue within two years. Competition grew tough, especially from Anthropic's Claude Code, which drew away users. Cursor responded with Cursor 3, emphasizing agents, and developed its own model. That effort relied on a modified version of China's Kimi K2.5.
xAI's Position and Recent Steps
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Elon Musk sees this as a way to bolster xAI, which trails OpenAI's Codex and Anthropic's Claude Code in coding features and performance. xAI has faced staff departures. In March, it hired Andrew Milich and Jason Ginsberg, previously with Cursor. The firm now works on multiple new Grok models.
SpaceX completed an internal merger with xAI in February 2026. That put the combined entity's value at $1.25 trillion. An initial public offering comes in June.
Company Backgrounds
SpaceX, started by Elon Musk in 2002, builds and launches rockets for missions to space. It also runs the Starlink network for global internet via satellites. The company has pioneered reusable rockets, cutting launch costs dramatically. xAI, launched by Musk in 2023, focuses on AI development to understand the universe. It created the Grok chatbot series, trained on massive data sets. Cursor stands out as an AI-powered code editor that helps developers write, edit, and debug code faster. It competes in a market crowded with tools from big players like OpenAI and Anthropic.
This option agreement ties these efforts together. SpaceX gains a strong coding AI asset. Cursor gets vital computing power. xAI closes its competitive gap. All parties position for growth in AI-driven software development.