SpaceX Negotiates Option to Acquire Cursor for $60 Billion

SpaceX has struck a deal with AI coding platform Cursor that includes an option to acquire the company for $60 billion later this year, or alternatively pay $10 billion for a partnership to develop next-generation coding AI. The arrangement, structured ahead of SpaceX's anticipated IPO, combines Cursor's developer distribution with SpaceX's Colossus supercomputer, which has computing power equivalent to a million Nvidia H100 chips. Cursor's valuation has skyrocketed from $2.5 billion in January of last year to $29.3 billion post-money in its November Series D funding round, with recent reports suggesting a $50 billion target. The deal comes as SpaceX faces financial pressures from acquiring xAI and X, while Cursor confronts intensifying competition from Anthropic and OpenAI, which are rolling out their own coding tools despite Cursor still relying on their Claude and GPT models.

SpaceX's $60 Billion Acquisition Option for Cursor

• ▪SpaceX struck a deal with Cursor to develop a next generation coding and knowledge work AI
• ▪Andrew Milich left Cursor last month to join xAI where he reports directly to Elon Musk
• ▪SpaceX described the partnership with Cursor as combining Cursor's product and distribution to expert software engineers with SpaceX's Colossus supercomputer
• ▪Cursor is using tens of thousands of xAI chips to train its latest AI model
• ▪SpaceX will either pay Cursor $10 billion for its work or acquire Cursor for $60 billion at some undisclosed point later this year
• ▪xAI began renting computing power from its data centers to Cursor last week
• ▪SpaceX's Colossus supercomputer has the equivalent compute power of a million Nvidia H100 chips according to SpaceX
• ▪SpaceX's deal with Cursor includes an option to buy Cursor for $60 billion later this year

Cursor's Rapid Valuation Growth and Market Position

• ▪Cursor was assigned a $29.3 billion post-money valuation when it closed its Series D funding in November
• ▪Cursor's valuation climbed to $9 billion by May of last year
• ▪Cursor was valued at $2.5 billion in January of last year
• ▪TechCrunch reported last week that Cursor was eying a $50 billion valuation in an upcoming private fundraising round
• ▪Cursor closed on $2.3 billion in Series D funding in November

Strategic Weaknesses and Competitive Pressures

• ▪Neither Cursor nor xAI has proprietary models that can match the leading offerings from Anthropic and OpenAI
• ▪Anthropic and OpenAI are now competing directly with Cursor for the developer market
• ▪Cursor still uses and sells access to Claude and GPT models

Perspective of Market observers and analysts

• ▪The $60 billion valuation for Cursor represents more than double the $29.3 billion post-money valuation Cursor received in November

Perspective of Cursor's competitors (Anthropic and OpenAI)

• ▪Neither Cursor nor xAI has proprietary models that can match the leading offerings from Anthropic and OpenAI