3 Key Takeaways From SpaceX's Potential $60 Billion Deal With Cursor Leading Up to Its IPO

SpaceX has been making a lot of splashy moves leading up to its initial public offering (IPO), which is expected in June. It acquired one of Elon Musk's other companies, xAI, in February. And recently, it announced a deal that gives it the rights to buy AI company Cursor.

As the momentum ramps up ahead of that IPO -- which, at a reported target valuation of $1.75 trillion, is expected to be the largest ever -- let's consider what the Cursor deal might mean for SpaceX.

Image source: Getty Images.

1. SpaceX could wind up paying Cursor a hefty breakup fee

The new deal isn't a straightforward acquisition. It's essentially an agreement under which they will jointly develop improved AI tools, but it also gives SpaceX the right to acquire Cursor for $60 billion by the end of this year. If it doesn't, it will have to pay Cursor a $10 billion breakup fee for their collaborative work during that time.

Paying $10 billion for months' worth of collaboration with no equity on the back end would be a major hit to SpaceX's cash (around $25 billion), so chances are, it will opt for the acquisition. It's likely that it would pay Cursor that $60 billion in SpaceX stock after the IPO.

2. SpaceX could use the AI talent

If SpaceX wants to make serious headway in AI, it will need more talent and additional distribution channels to keep up with the likes of OpenAI and Anthropic. As one of the premier AI coding agents, Cursor provides a lot of that. It isn't close to the scale of those two leaders, but for a company that has only been around a few years, its momentum is impressive. Around 64% of Fortune 500 companies use its offerings.

SpaceX will provide the infrastructure and computing capacity, while Cursor will provide a legitimate AI product and valuable coding data. This will help SpaceX with its Starlink and Starship software, and will (ideally) help xAI make up some ground on rival AI models.

3. The move is needed to justify the valuation SpaceX wants

If SpaceX were to fetch a $1.75 trillion valuation, it would be the world's ninth-most-valuable company by market cap, based on April 27 stock prices. As strictly an aerospace company, it would be nearly impossible to justify that valuation. As an aerospace and AI company, it becomes easier to justify (kinda sorta).

The combination of this move and the xAI acquisition positions SpaceX to receive an "AI boost" to its valuation rather than being valued as a typical aerospace or telecom company. It's still pursuing an extremely high valuation for a money-losing business, but the market is rarely rational.

The Motley Fool has a disclosure policy.