SpaceX strikes $60 billion deal for the right to buy AI coding startup Cursor weeks before its IPO

SpaceX has the right to buy Cursor, the AI coding startup now at $1B ARR, for $60 billion, or pay $10 billion if the deal never closes, just weeks after filing to go public.

SpaceX has struck one of the most unusual deals in AI so far this year, agreeing to pay Cursor, the fast-growing AI coding startup, either $60 billion to acquire it outright or $10 billion for the work the two companies do together if no acquisition happens.

The arrangement was announced Tuesday in a statement posted on X, and reported by Business Insider. It gives Cursor access to Colossus, the supercomputer powered by roughly 200,000 Nvidia GPUs that xAI built near Memphis – and which SpaceX now owns after absorbing xAI in February.

It also gives SpaceX something it has been visibly short on: a credible foothold in the one corner of AI that is minting revenue fastest.

A coding bet ahead of the IPO

The timing is hard to ignore. In early April, SpaceX confidentially filed for an IPO, setting the stage for a potential public debut later this year. A $60 billion option on the leading product in AI coding is the kind of story a rocket company preparing to go public would want to tell investors.

Cursor, founded in 2022, has become the breakout product in what developers now call “vibe coding”, writing software by describing it to a model rather than typing it out line by line. The startup said in a November blogpost that it had reached $1 billion in annual recurring revenue with a team of over 300 employees, and closed a Series D at a $29.3 billion post-money valuation.

It has also been quietly pushing further up the stack. Earlier this year, Cursor released its first agentic coding model, a move that requires vastly more compute than running someone else’s model under the hood.

That is the bottleneck SpaceX is offering to solve.

“The combination of Cursor’s leading product and distribution to expert software engineers with SpaceX’s million H100 equivalent Colossus training supercomputer will allow us to build the world’s most useful models,” SpaceX wrote in its statement on X.

Cursor framed it in similar terms on its own blog. “We’ve wanted to push our training efforts much further, but we’ve been bottlenecked by compute,” the company wrote. “With this partnership, our team will leverage xAI’s Colossus infrastructure to dramatically scale up the intelligence of our models.”

Co-founder Michael Truell kept his reaction characteristically short. “Excited to partner with the SpaceX team to scale up Composer,” he wrote on X. “A meaningful step on our path to build the best place to code with AI.”

What SpaceX gets – and what Musk has been missing

For Musk, the deal plugs a hole he has openly acknowledged. At a conference recently, he said Grok, xAI’s chatbot, “is currently behind in coding”, a notable admission given that rival Anthropic’s Claude Code has become one of the defining products of the last year.

xAI has been trying to close that gap for months. In March, the company hired two former Cursor product engineering leads, Andrew Milich and Jason Ginsburg, to oversee its product team, reporting to Musk and xAI president Michael Nicolls. Business Insider reported last week that xAI was already planning to provide Cursor with computing power, foreshadowing Tuesday’s announcement.

The wider context is less tidy. xAI has recently seen leadership turnover, with high-profile employees – including Musk’s 11 original cofounders – leaving the startup. A $60 billion option on Cursor effectively outsources the product Musk’s own team has struggled to ship.

It also cements a pattern. In February, SpaceX swallowed xAI in a merger Musk valued at $1.25 trillion. Now, two months before a rumored IPO, it is using that balance sheet to put a call option on the most valuable private company in AI coding.

Steven Bartlett is an investor in both Founded and SpaceX