Why SpaceX's Acquisition of Cursor AI Could Be a Massive Bargain for Elon Musk and His Team

On Tuesday, June 16, newly public SpaceX (NASDAQ: SPCX) announced it would acquire AI coding company Cursor for $60 billion. SpaceX will pay for Cursor all-in-stock at a price determined by the public share price in the week leading up to the closing date, which SpaceX anticipates will occur around the third quarter.

The announcement occurred shortly after SpaceX went public the prior day, giving it a public market valuation. The announcement to buy Cursor just one day later suggests that Cursor was of high importance to SpaceX.

Indeed, should the two companies execute on a combined vision, Cursor could become a crucial missing piece of the puzzle for SpaceX, making the combined company much more valuable than each would be alone. In that light, did Elon Musk & Co. just get a huge bargain?

What is Cursor AI?

Cursor is an AI-first software development platform built by the start-up Anysphere, founded in 2022 by four MIT classmates. By 2025, the platform had already become a go-to AI-powered coding platform for software developers.

Cursor was built from the ground up to be an AI-first platform but for much of its history has used outside large language models, such as Claude from Anthropic, ChatGPT from OpenAI, and even open-source Chinese models, for the underlying intelligence. Cursor would then leverage its own pre-training and reinforcement learning to fine-tune the model for software coding.

Coding has become the first real "killer app" for generative AI, which puts Cursor in a great position. However, in early 2026, a flood of coding models came to market, putting up a competitive threat, especially Anthropic's Claude code.

But Cursor has redoubled its efforts in 2026 and has seen growing traction in recent months. Its annualized run rate has doubled since February, from $2 billion then to roughly $4 billion as of early June. So SpaceX is buying Cursor for 15 times the current annualized run rate, which might be considered expensive for a normal company but could actually be seen as "cheap" for a company growing that quickly.

Cursor has already been working with xAI and SpaceX

Cursor and xAI, before xAI merged with SpaceX, had a history of working together. Roughly one year ago, Musk took to X (formerly Twitter and now part of SpaceX) to complain that Cursor's software was not effectively communicating with Grok's coding model.

The good news is that later the very same day, Musk tweeted that the Cursor team was at xAI, already solving the problem.

A Cursor engineering team is at xAI today, so integration issues are being solved in real-time

-- Elon Musk (@elonmusk) July 11, 2025

So it appears that the two companies have a history of working together, and that each AI team has developed a mutual respect.

Image source: Getty Images.

A win for both SpaceX and Cursor

This year, Cursor and SpaceX have collaborated even more closely, working together on a 1.5 trillion-parameter model. Working together augments Grok's coding capabilities, a function it may have lagged behind its rivals in, while also enabling Cursor to develop its own internal model.

In May, Musk tweeted that Grok and Cursor were building such a model, incorporating substantial Cursor data into Grok's LLM. On the same day the acquisition was announced, June 16, Cursor presented the new 1.5 trillion custom model, which it announced was built in collaboration with SpaceX.

As a customer-focused software company, Cursor delivered a great product; however, its reliance on large external language models threatened its competitive position. Grok, on the other hand, has generally lagged competitors OpenAI and especially Anthropic in the AI coding realm. Look no further than xAI, which recently rented out significant capacity to rivals, as evidence that Grok adoption had lagged initial expectations. Again, software coding has become the first "killer app" for generative AI. Therefore, SpaceX must have a competitive product here.

This is why the tie-up is so important. Cursor will benefit from having access to SpaceX's capital and vast computing resources, helping it fend off the Anthropic and OpenAI onslaught. At the same time, SpaceX will gain expertise in an all-important area of generative AI, filling a hole it desperately needed to fill.

In its IPO prospectus, SpaceX said its largest addressable market by far was artificial intelligence -- a much bigger market than mere rocket launches or satellite broadband. Cursor fills a crucial "missing piece" for the company, and it appears Musk paid a quite reasonable price for it.

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.