Microsoft almost fought SpaceX for Cursor in a massive $60 billion AI showdown

Internal sources claim Microsoft considered bidding for the AI-powered IDE before SpaceX secured a multi-billion dollar acquisition option.

Neowin reported yesterday that SpaceX had gained the rights to buy the AI-powered IDE, Cursor, for $60 billion later this year. Now, it has come to light that Microsoft was also looking at a potential deal to pick up the AI startup, according to two sources with knowledge of the matter.

In a CNBC report, it is claimed that Microsoft was considering buying Cursor, but that it decided not to proceed with the bid, according to one of the two sources. CNBC didn't name either of the people reporting this because these conversations were held behind closed doors and the sources shouldn't be speaking publicly.

The fact that Microsoft was thinking of acquiring the IDE company is peculiar given that it already owns GitHub Copilot and Visual Studio Code, which is a competing product. The Redmond giant may have anticipated criticism from regulators or SpaceX may have offered a better deal to Cursor.

SpaceX revealed on X that this week that it was now working closely with Cursor to "create the world's best coding and knowledge work AI". It also has the option to buy Cursor later in the year for $60 billion. According to CNBC, SpaceX made its the deal at a late stage in Cursor's most recent fundraising round, which has apparently caught prospective investors off guard.

If SpaceX does acquire the company it will put it in a more competitive position against the likes of Google, Anthropic, and OpenAI, which each have coding tools like Antigravity, Codex, and Claude Code.