Rockets, satellite internet, AI, and social media conglomerate SpaceX on Tuesday announced a deal with Cursor that’s worth anywhere between $10 billion and $60 billion. SpaceX is partnering with Cursor, a purveyor of AI coding tools for developers that has scaled to more than $2 billion in annualized revenue. Reporting indicates the startup could be worth as much as $50 billion in the private markets today.
In simple terms: SpaceX and Cursor will bring their respective talents together to “create the world’s best coding and knowledge work AI,” as the space company put it. And per Cursor, the deal would let it “dramatically scale up the intelligence” of its models.
Why are there two prices for the deal? SpaceX will pay no less than $10 billion to Cursor for the collaboration, but has the option to buy Cursor whole-cloth for $60 billion “later this year.”
We won’t know if SpaceX will pull that lever until it does, or doesn’t.
Why are the two companies partnering?
- Cursor has trained impressive AI coding models that have earned both developer interest and market share. In contrast, SpaceX’s xAI has not had a coding hit since its grok-code-fast-1 model had its time in the sun.
- xAI is sitting on top of a massive compute footprint it built out in a hurry. Thanks to its owner, Elon Musk, xAI has been able to raise truckloads of cash to scale its data centers, though the efficiency of those data centers doesn’t seem great, per an internal memo.
If you combine the two, you get a previously constrained AI lab (“we’ve been bottlenecked by compute,” Cursor said in a post) with all the muscle it could hope for.
In theory, this could result in better models from the pair than either could manage on their own.
Are their relative strengths truly complementary? Yes. Few companies in history can match xAI’s ability to raise cash, and Cursor has been successfully selling its AI coding product in a market dominated by OpenAI (Codex) and Anthropic (Claude Code).
Cursor’s growth is both impressive and important. Many of the world’s developers use AI coding tools from OpenAI, Anthropic, and Cursor. That means the younger startup has access to a firehose of usage data from developers who are using both its own models and competitors’ products in production.
It’s worth noting that Cursor lets its customers opt out of sharing their information with the company and third parties, but presumably enough folks allow the company to learn from their work, thereby providing a valuable data source.
So while one could frame the deal as 1 + 1 = 3 (xAI’s compute + Cursor’s AI prowess = more competitive AI coding models), it’s important to include the data component in our calculations.
Why do we care so much about AI coding models? Two reasons.
This is an excerpt from Cautious Optimism, a modestly upbeat publication focused on technology, business, and power. Read the rest on Cautious Optimism.
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Alex Wilhelm is a journalist focused on technology and finance. He co-hosts the This Week in Startups podcast, and writes the Cautious Optimism newsletter. He was previously Editor in Chief of TechCrunch+.
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