Microsoft Eyed Cursor Before SpaceX’s $60 Billion Deal

Before SpaceX revealed the rights to purchase Cursor for $60 billion, Microsoft considered purchasing the AI coding startup, according to CNBC. In the end, Microsoft chose not to submit a formal proposal. 

CNBC had revealed that the software giant Microsoft chose not to make a formal bid, leaving the door open for SpaceX to lock up rights to the AI coding startup. 

CNBC further stated a potential reason why Microsoft backed out from acquiring the startup Cursor is that it chose not to make a formal bid, likely because the company already dominates the AI coding space through GitHub Copilot and prefers to focus its massive capital expenditures, exceeding $80 billion, on building out its own AI infrastructure and supporting its primary partnership with OpenAI rather than pursuing a highly priced acquisition of a direct competitor.

SpaceX has the option to buy Cursor outright for $60 billion before the end of the year, according to the agreements revealed on Tuesday. If that option is not exercised, SpaceX will pay Cursor $10 billion for the work the two firms are performing together. Also, CNBC revealed that the SpaceX deal only became apparent at the very end of Cursor’s fundraising process, so potential investors were caught off guard when it came to pass. SpaceX had offered Cursor computational resources and assets prior to the deal’s announcement.

Microsoft’s primary tool in the AI coding battle has been GitHub Copilot; earlier this year, Nadella informed analysts that the service had 4.7 million paying customers, a 75% rise from the previous year. Nevertheless, according to CNBC, Cursor has become the market leader, with Anthropic and OpenAI surpassing Microsoft as well.

There were other significant players who pursued Cursor besides Microsoft. Additionally, other sources also revealed that Cursor turned down two different approaches from OpenAI because the company’s management had made maintaining its independence a top priority. This stance has apparently been bolstered by income that has been doubling at a rate of about every two months.

Andreessen Horowitz, Nvidia, and Thrive Capital were those expected to contribute to Cursor’s $2 billion fundraising effort at the time of the SpaceX acquisition, which would have put the company’s valuation at over $50 billion. SpaceX negotiated a price tag of $60 billion, which is above the initial company’s valuation amount. Cursor’s post-money valuation was $29.3 billion after a $2.3 billion investment. Series D investment closed in November, as it was a significant increase from $2.5 billion at the beginning of 2025.

Earlier this year, SpaceX integrated Musk’s AI business, xAI, into its operations in a deal valued at $1.25 trillion. The united business is currently preparing to go public.

Also, SpaceX revealed the agreement in a Tuesday X post that stated an objective to create “the world’s best coding and knowledge work AI.” In response to the agreement, Truell said on X that he is “excited to partner with the SpaceX team to scale up Composer,” a reference to the AI model Cursor has created.

The members of the press have asked Microsoft and Cursor for comments; however, neither of the companies has responded.

The unique dual-part agreement gives SpaceX the right to acquire Cursor outrightly for $60 billion by the end of the year, or, if the acquisition does not occur, SpaceX is to pay Cursor $10 billion for their joint development work. The deal also provides Cursor with access to xAI’s Colossus supercomputer, offering the compute power equivalent of 1 million Nvidia H100 chips, to help scale its agentic coding models, leading analysts to view the massive valuation as a strategic move to position SpaceX as an AI leader ahead of its anticipated $1.8 trillion IPO later this year, in June 2026.