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

SpaceX said it has struck a deal with Cursor to develop a next generation “coding and knowledge work AI,” which includes a surprising provision—an option to buy the popular software development platform for $60 billion later this year.

Partnering with and potentially purchasing a leader in the hottest AI product category can only be seen in the context of SpaceX’s much-anticipated public offering. Investors seeking more value in the IPO might see its engagement with Cursor as another way to extract value from Elon Musk’s increasingly sprawling tech conglomerate.

The deal won’t shock those who follow 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 model. And last month, two of Cursor’s most senior engineering leaders, Andrew Milich and Jason Ginsberg, left the company to join xAI, where both report directly to Musk.

SpaceX described the partnership as a project combining Cursor’s “product and distribution to expert software engineers” with SpaceX’s Colossus supercomputer, which the company claims has the equivalent compute power of a million Nvidia H100 chips.

SpaceX also said that at some undisclosed point later this year, it will either pay Cursor $10 billion for its work or acquire the company for $60 billion. Last week, TechCrunch reported that Cursor was eying a $50 billion valuation in an upcoming private fundraising round. That figure itself reflects an astonishing series of leaps. Cursor was valued at just $2.5 billion in January of last year, climbed to $9 billion by last May May, and was assigned a $29.3 billion post-money valuation when it closed on $2.3 billion in Series D funding in November.

Either of those figures would represent a significant expense for SpaceX, which is widely seen to be losing money following the acquisition of xAI and the social media network X and is planning extensive capital investment. The brief statement did not say if either deal could be paid in SpaceX stock.

While the move could shore up weaknesses at each company, it also reveals them. Neither Cursor nor xAI has proprietary models that can match the leading offerings from Anthropic and OpenAI — the same companies now competing directly with Cursor for the developer market.

Cursor still uses and sells access to Claude and GPT models even as both firms roll out their own coding tools, an awkward arrangement the SpaceX partnership may be designed to eventually escape.