Elon Musk's SpaceX announced on Wednesday that it is partnering with coding platform Cursor to build new AI models. As part of this deal, Cursor gave SpaceX the right to acquire the company later this year for $60 billion or to pay $10 billion for their work together.

Cursor said in a blog post that its work has been "bottlenecked by compute," meaning it hasn't been able to develop more advanced models due to a lack of the necessary hardware and computing power. SpaceX's Colossus supercomputer, a data center-like complex in Memphis, Tennessee, is the solution, the two companies agreed. SpaceX said the supercomputer has the equivalent of a million H100 Nvidia chips, one of the most popular GPUs for AI development.

The deal highlights the growing role of agentic coding tools beyond just software companies and developers. The potential acquisition also raises the possibility that Cursor could bring agentic coding abilities to xAI's Grok, a notable hole in its current offerings compared to popular competitors like Anthropic and OpenAI. 

Here's what you need to know about the deal.

What is Cursor?

Cursor is an AI coding platform meant to help software engineers and vibe code enthusiasts alike. Composer's coding model, Cursor, is agentic. That means it can autonomously write code and run tasks. 

Nvidia CEO Jensen Huang called Cursor his "favorite enterprise AI service" in an October interview. The AI industry is fickle, and the opinion of a major leader like Huang isn't just free marketing -- it controls funding, directs research, shapes public opinion and ultimately determines whether a company is successful. The new partnership with SpaceX is likely to help solidify Cursor as a household name.

These kinds of AI coding tools, like Anthropic's Claude Code and OpenAI's Codex, have been very popular this year due to their ability to create things with AI, compared to a chatbot giving an answer based on existing information. They've also sparked a lot of debate and concern about the future of the software business as AI agents become increasingly capable of helping real humans. 

How does Cursor fit into SpaceX and xAI?

The SpaceX and Cursor partnership is most immediately about getting the resources to create more advanced AI models, with the lofty goal of creating "the world's best coding and knowledge work AI." That could certainly be used in SpaceX's rocket launches, but the scale of its business means the AI could be used in a variety of ways.

SpaceX and Cursor did not immediately respond to requests for additional comment.

Elon Musk has talked at length about transforming X (formerly Twitter) into his dream super app, similar to China's WeChat, which does social media, payments, messaging and more. While X is still solidly a social media app, with a heavy dose of Grok AI, he's building out an mega-congolmerate of companies under the X name.

In February, SpaceX merged with xAI. That deal brought SpaceX's rocket business, Starlink satellites, the X social media platform and xAI's Grok chatbot under one parent company. Tesla isn't included.

The Grok AI chatbot is probably best known now for creating nonconsensual sexual AI images, which prompted outrage and investigative inquiries at the beginning of the year. Adding Cursor to SpaceX and, theoretically, xAI's business would bolster its appeal to enterprise customers who want coding tech for work.

The merger would bolster SpaceX's anticipated summer IPO, which would take the company public and allow people to buy shares of stock. Initial estimates say SpaceX could have the largest IPO ever, valued at $1.75 trillion. Musk has a financial stake or executive title in each business, so a successful merger and IPO would make the world's richest person even richer.

There's no guarantee that SpaceX will acquire Cursor at the end of its deal. Bloomberg reported that the structure of the Cursor deal is partly because an outright acquisition now could further complicate the planned IPO -- already a nightmare of filings and paperwork.

Musk is also a notoriously mercurial businessman, changing his mind and direction many times before deals are officially sewn up. His acquisition of Twitter was a long, drawn-out saga, where he tried to back out of his purchase before ultimately taking over and immediately changing the platform.