Cursor "sold itself" to Space X, only because Claude and computing power pressure were too great

Cursor "sold itself" to Space X, only because Claude and computing power pressure were too great

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AI programming assistant Cursor chooses to cast itself into the arms of SpaceX, behind which lies a multifaceted crisis of financing obstacles, mounting competition, and costly computing power.

According to The Information, in the weeks before SpaceX announced its potential $60 billion acquisition of Cursor, this high-profile AI programming startup was actively seeking several billion dollars in financing, but was repeatedly turned down. Many investment institutions, which are usually capable of writing large checks, politely declined Cursor, citing concerns about the company’s competitiveness due to the rapid rise of Anthropic’s Claude Code. A fund manager who recently met with Cursor executives put it bluntly: "Investors’ fear of Anthropic is currently very strong."

This acquisition is significant for Cursor: if the deal goes through, Cursor will gain access to SpaceX’s massive server resources; if SpaceX ultimately pulls out, Cursor will receive a $10 billion break-up fee. This deal not only solves Cursor’s immediate computing power issues, but also provides a strategic path away from reliance on Anthropic and OpenAI models.

Financing Obstacles, the Shadow of Anthropic

Cursor’s financing difficulties reflect the subtle dynamics of the current AI investment market.

According to people familiar with the matter, large late-stage tech investors such as Iconiq have already invested billions of dollars in OpenAI and Anthropic. Now, facing Cursor’s expected valuation of up to $50 billion, these institutions are unwilling to invest more in a competitor, and also doubt whether Cursor can compete long-term against such well-funded rivals.

Financial data further exacerbates investor concerns. According to two people directly familiar with the company’s financials, as of the quarter ending in January this year, Cursor's gross margin was negative 23%—an unusually low figure for a startup with substantial revenue. However, another person familiar with the matter said the company’s gross margin has since turned positive.

Nevertheless, some investors remain attracted by Cursor’s growth momentum and reputation among developers. According to insider sources, Cursor’s annualized revenue last month reached $2.7 billion, about 14 times higher than a year ago; some investors expect it could top $7 billion by year-end. Ultimately, Cursor raised $2 billion in new funds from institutions including Nvidia, Andreessen Horowitz, Thrive Capital, and Battery Ventures, with Nvidia contributing the most. However, after the SpaceX acquisition was announced, this round of financing was immediately halted.

Burn Rate Pressure Unsustainable

The cost of computing power is another sword hanging over Cursor’s head.

Cursor’s programming tools and intelligent agent products rely heavily on models from Anthropic and OpenAI, meaning the company must pay high fees to its biggest competitors, directly eroding its profit margin. To address this, Cursor has started developing its own models based on open-source models, aiming to reduce external dependence and improve gross margin.

But developing in-house also requires massive investment. Sources say that even after the recent financing, Cursor's management still expected to raise several billion dollars by year-end, specifically to support the AI computing power required. This ongoing funding gap makes strategic M&A a more attractive option.

SpaceX’s Calculus: Boost Revenue, Enter the Enterprise Market

For SpaceX, acquiring Cursor also has a clear strategic logic.

According to The Information, SpaceX’s xAI division had capital expenditures of $12.7 billion last year and carries significant debt, but its total annual revenue was only $3.2 billion, most of which came from social media platform X. By contrast, Cursor achieved revenue of about $770 million in its last fiscal year ending January, nearly 24 times higher than the $32 million of the previous year, which is almost a quarter of xAI’s annual revenue.

Cursor’s addition will bring xAI a substantial AI application business in the enterprise market—a sector where xAI’s Grok product has yet to make an effective breakthrough. In addition, both parties plan to jointly develop proprietary programming models, helping Cursor gradually get rid of dependence on Anthropic and OpenAI.

However, this deal will weigh on SpaceX’s financial results: Cursor lost nearly $900 million in the last fiscal year. If the acquisition is completed, early investors such as Andreessen Horowitz and Thrive Capital will reap substantial returns—Cursor’s valuation at the end of last year was $30 billion, up from less than $3 billion at the start of the year. SpaceX is currently conducting a dense investor roadshow in preparation for a potential IPO in June valued as high as $1.5 trillion.

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