SpaceX is working with Cursor and has an option to acquire the startup for $60 billion

SpaceX announced it has signed a deal with Cursor to develop the next generation of “coding and knowledge work AI.” It includes a surprising clause: an option to buy the popular software development platform for $60 billion later this year.

Partnering with and potentially acquiring leaders in the most popular AI product categories can only be seen in the context of SpaceX’s long-awaited initial public offering. Investors seeking more value from an IPO may see their involvement with Cursor as another way to extract value from Elon Musk’s increasingly sprawling technology conglomerate.

The agreement won’t come as a shock to anyone who follows the industry closely. Last week, it was reported that xAI would begin renting computing power from its data centers to Cursor, with the coding startup using tens of thousands of xAI chips to train its latest AI models. And last month, two of Cursor’s most senior engineering leaders, Andrew Milich and Jason Pinsberg, left the company to join xAI, both reporting to Musk.

SpaceX describes the partnership as a project that combines Cursor’s “product and distribution to professional software engineers” with SpaceX’s Colossus supercomputer, which the company claims has the same computing power as 1 million Nvidia H100 chips.

SpaceX also said it plans to pay Cursor $10 billion for its work or acquire the company for $60 billion at an undisclosed time later this year. Last week, TechCrunch reported that Cursor was aiming for a $50 billion valuation in an upcoming private funding round. The numbers themselves reflect an astonishing series of leaps forward. Cursor’s valuation rose from just $2.5 billion last January to $9 billion by May of last year, and it was assigned a post-money valuation of $29.3 billion when it closed a $2.3 billion Series D in November.

Both numbers would be significant expenses for SpaceX, which is widely seen as losing money on its acquisitions of xAI and social media network X, and is planning major capital expenditures. The brief statement did not say whether either contract would be paid in SpaceX stock.

In the meantime, the move could shore up each company’s weaknesses, but it also exposes them. Neither Cursor nor xAI have their own models comparable to Anthropic or OpenAI’s flagship products. These companies are now in direct competition with Cursor in the developer market.

Despite both companies rolling out their own coding tools, Cursor still uses and sells access to Claude and GPT models, an awkward arrangement that this new SpaceX partnership may be designed to escape from eventually.