Deal Structure Includes Acquisition Option or $10 Billion Partnership as Musk Expands AI Stack Ahead of IPO

Elon Musk's SpaceX is considering acquiring AI development tool startup Cursor for as much as $60 billion, signaling a potential move into the fast-growing AI coding software market.

SpaceX said the Cursor deal is structured around two options. The company has signed an agreement with Cursor to develop what it described as a next-generation coding and knowledge work AI, which includes a clause allowing for a $60 billion acquisition. Alternatively, SpaceX could pay $10 billion for the output generated under the partnership.

Either option would represent a significant financial commitment for SpaceX, which has been absorbing losses following its merger with xAI and its acquisition of the social media platform X, while planning large-scale capital investments. The company did not disclose whether the transaction would involve SpaceX equity.

Cooperation between SpaceX and Cursor had been reported earlier. Business Insider said on April 16 that xAI was discussing leasing large-scale GPU computing resources to Cursor to train its next-generation model, Composer 2.5. It also reported that two senior Cursor engineering leaders, Andrew Milich and Jason Ginsberg, had moved to xAI and report directly to Musk.

The move is widely interpreted as part of preparations for a potential initial public offering. Following the merger of SpaceX and xAI, Bloomberg has estimated a valuation of about $1.25 trillion. SpaceX is targeting an IPO valuation of $1.75 trillion.

The company filed confidential IPO documents with the U.S. Securities and Exchange Commission on April 1 and is expected to begin a roadshow for institutional investors in early June, with a listing potentially as early as this summer. At a $1.25 trillion valuation, SpaceX would rank around ninth globally by market capitalization, while a $1.75 trillion valuation would place it alongside companies such as TSMC, Saudi Aramco and Meta.

SpaceX said the partnership combines Cursor's software engineering tools with its Colossus supercomputer, used by xAI to train its Grok model and next-generation large language models. The Colossus system is located in Memphis, Tennessee.

xAI has said Colossus delivers computing performance equivalent to about 1 million Nvidia H100 chips, with infrastructure capacity estimated at 1 to 1.5 gigawatts. The Cursor partnership has also been seen as a signal that SpaceX and xAI could enter the AI infrastructure services market, competing with providers such as Amazon Web Services and Google Cloud.

Cursor's rapid rise reflects strong market demand for AI coding tools. Its valuation stood at $2.5 billion in January 2025 and rose to $9 billion by May. After closing a $2.3 billion Series D round in November, it reached a $29.3 billion valuation. TechCrunch reported on April 17 that Cursor is preparing a new funding round targeting $2 billion at a $50 billion valuation, implying a roughly 20-fold increase in five quarters.

Cursor's appeal lies in its flexible integration with multiple AI coding models. The tool operates within Visual Studio Code, allowing AI to write, edit and optimize code. It competes most directly with GitHub Copilot.

Unlike terminal-based tools such as Anthropic's Claude Code or Google's Gemini CLI, Cursor and Copilot operate within an integrated development environment. Cursor supports multiple models, including those from OpenAI and Anthropic, enabling developers to select models based on specific tasks such as large-scale code analysis or rapid code generation.

While Copilot has expanded to support a broader set of models, including Google and Anthropic offerings, Cursor differentiates itself through a curated focus on leading models and its BYOK (Bring Your Own Key) policy. This allows developers to connect external AI models using their own API keys, offering greater flexibility and extensibility.

A key question is whether Cursor's multi-model approach would be maintained if integrated with xAI's Grok ecosystem. Multi-model support is a major factor in developer adoption.

If the acquisition proceeds, SpaceX would extend its AI capabilities across chips, models, data centers, satellite communications and potentially space-based data infrastructure, adding AI development tools to its broader technology stack.

SpaceX Weighs Potential $60 Billion Acquisition of Cursor AI Coding Startup