Microsoft looked at buying Cursor before SpaceX deal, sources say

```json { "title": "Microsoft Eyed Cursor Before SpaceX's $60B Deal", "metaDescription": "Microsoft explored buying AI coding startup Cursor before SpaceX secured the right to acquire it for $60 billion, CNBC reported on April 22, 2026.", "content": "<h2>Microsoft Considered Acquiring Cursor Before SpaceX Locked In $60 Billion Deal</h2><p>Before SpaceX announced it had secured the right to acquire AI coding startup Cursor for $60 billion, Microsoft quietly explored a potential deal of its own — and chose not to proceed. That revelation, reported by CNBC on April 22, 2026, adds a significant new dimension to one of the most dramatic acquisition stories in recent tech history, raising questions about Microsoft's AI coding strategy and its ability to compete in a market it once appeared positioned to lead.</p><p>Cursor, the AI coding assistant made by San Francisco startup Anysphere, has become one of the most valuable private technology companies in the world in a remarkably short span of time. Co-founded by MIT classmates Michael Truell, Aman Sanger, Sualeh Asif, and Arvid Lunnemark, the company was valued at just $2.5 billion in January 2025. By November 2025, after closing $2.3 billion in Series D funding, that figure had climbed to $29.3 billion. By February 2026, its annualized revenue had crossed $2 billion — and forecasts, according to two people familiar with the matter cited by TechCrunch, put its annualized revenue run rate above $6 billion by year-end.</p><p>Now, at the center of a $60 billion deal with SpaceX — the combined aerospace and AI giant formed when Elon Musk merged SpaceX with his AI startup xAI in February 2026 in a transaction valued at $1.25 trillion — Cursor stands as a defining prize in the AI coding wars. And Microsoft, it turns out, had a chance to make a move first.</p><h2>Microsoft Passed on Cursor — Now Faces a More Competitive Market</h2><p>According to two people familiar with the matter, cited by CNBC and speaking anonymously because the discussions were private, Microsoft examined a potential acquisition of Cursor before ultimately declining to pursue a bid. The report offers no details on how far those discussions progressed or why Microsoft chose not to move forward.</p><p>The decision looks costly in hindsight. Microsoft has been investing heavily in the AI coding space through its GitHub Copilot product, and CEO Satya Nadella told analysts in January 2026 that GitHub Copilot had reached 4.7 million paying subscribers — a 75% increase from a year earlier. Despite that momentum, CNBC reports that the AI coding market is currently being dominated by Cursor, alongside Anthropic and OpenAI.</p><p>The competitive pressure is intensifying from multiple directions. OpenAI CEO Sam Altman announced on X on April 22 that Codex had reached 4 million active users — less than two weeks after crossing the 3 million mark. Anthropic's Claude Code service has helped Anthropic reach $30 billion in annualized revenue as of April 2026. Against that backdrop, Microsoft's stock has dropped 10% in 2026, underperforming both the broader market and its hyperscaler peers, according to CNBC.</p><p>The question of whether acquiring Cursor would have meaningfully changed Microsoft's competitive position remains open. What is clear is that the window has now closed. With SpaceX holding an option to buy Cursor outright, and with Cursor having scrapped its planned $2 billion funding round following the announcement, the company's future appears to be moving in a very different direction.</p><h2>How the SpaceX Deal Came Together — and Caught Investors Off Guard</h2><p>The SpaceX-Cursor deal was announced on Tuesday, April 22, 2026, but the path to it was anything but straightforward. According to TechCrunch, Cursor was in the final stages of closing a $2 billion funding round — with Andreessen Horowitz slated to co-lead, and Nvidia and Thrive Capital expected to participate — at a valuation of over $50 billion, according to CNBC. That round never closed. Instead, SpaceX intervened with an offer that prospective investors never saw coming.</p><p>Per CNBC, the SpaceX agreement came together so late in Cursor's fundraising process that prospective investors were caught off guard by the deal. In the weeks leading up to the announcement, SpaceX had been offering Cursor access to compute — a resource the company had publicly identified as a bottleneck. In an official statement posted on X, Cursor said: <em>"We've wanted to push our training efforts much further, but we've been bottlenecked by compute."</em></p><p>That compute constraint appears to have been the strategic opening SpaceX needed. The deal structure is unusual: SpaceX obtained the right to acquire Cursor for $60 billion later this year, or alternatively to pay $10 billion for the collaborative work the two companies are doing together. According to TechCrunch, SpaceX is delaying the potential outright acquisition until after its anticipated summer IPO — largely to avoid having to update its confidential financial filings before the listing. Financing a $60 billion purchase using newly issued public stock would be considerably easier after going public. SpaceX's IPO is targeting a valuation of $1.75 trillion to $1.8 trillion, which would potentially make it the largest IPO in history.</p><p>In the meantime, Cursor will gain access to xAI's Colossus supercomputer complex in Memphis, Tennessee — a facility SpaceX describes as housing the equivalent of one million H100 GPUs — for model training. As SpaceX wrote in an official post on X: <em>"The combination of Cursor's leading product and distribution to expert software engineers with SpaceX's million H100 equivalent Colossus training supercomputer will allow us to build the world's most useful models."</em></p><p>In a separate post, SpaceX stated: <em>"SpaceXAI and @cursor_ai are now working closely together to create the world's best coding and knowledge work AI."</em></p><h2>Cursor CEO Responds, as Senior Engineers Depart for xAI</h2><p>Cursor CEO Michael Truell, who is 25 years old, responded to the announcement on X with measured enthusiasm. <em>"Excited to partner with the SpaceX team to scale up Composer,"</em> Truell wrote, referring to his company's AI model. In a separate post, he called the deal <em>"a meaningful step on our path to build the best place to code with AI."</em></p><p>The deal comes against a backdrop of notable personnel movement. According to TechCrunch, two of Cursor's most senior engineering leaders — Andrew Milich and Jason Ginsberg — left the company to join xAI, where both report directly to Elon Musk. The departures preceded the announcement and add a layer of complexity to the broader Cursor-SpaceX relationship.</p><p>Cursor's scale at this point is substantial. According to Fortune, 67% of Fortune 500 companies use the company's technology. The company has more than 300 employees. Its annualized revenue crossed $2 billion in February 2026, and it is on a trajectory that, if forecasts hold, would more than triple that figure by the end of the year.</p><h2>Why This Deal Matters Beyond the Price Tag</h2><p>The Cursor-SpaceX deal is not simply a large acquisition — it is a signal about where AI infrastructure and application-layer software are converging. By securing Cursor, SpaceX-xAI gains one of the most widely adopted AI coding tools on the market and a direct distribution channel into enterprise software development. By securing Colossus, Cursor gains the compute necessary to build and train more capable models.</p><p>The timing is also notable. According to CNBC, Tuesday's announcement came less than a week before the start of the trial in Musk v. Altman — a high-profile legal case between SpaceX founder Elon Musk and OpenAI CEO Sam Altman, whose company was an early investor in Cursor. The intersection of legal proceedings, M&A activity, and competitive positioning in the AI coding market makes for an unusually compressed moment in the industry.</p><p>For Microsoft, the situation underscores a recurring tension in its AI strategy: the company has made substantial investments in AI infrastructure and developer tooling, but key assets have repeatedly ended up outside its orbit. GitHub Copilot's 4.7 million paying subscribers represent genuine traction — but in a market where Cursor reaches 67% of Fortune 500 companies and is tracking toward $6 billion in annualized revenue, the competitive gap is significant.</p><p>The broader AI coding market is now shaped by a handful of well-resourced players — SpaceX-xAI-Cursor, OpenAI, Anthropic, and Microsoft — each with different compute strategies, distribution approaches, and financial profiles. How those positions evolve over the next twelve months, and whether the SpaceX acquisition of Cursor closes following the IPO, will be among the most consequential storylines in enterprise AI.</p><p>For more tech news, visit our <a href=\"/news\">news section</a>.</p><h2>What Comes Next</h2><p>The immediate question is whether SpaceX exercises its option to acquire Cursor outright following its IPO. According to TechCrunch, the plan is to delay the full acquisition until after the public listing this summer, using publicly traded SpaceX stock to finance the $60 billion purchase. Cursor, meanwhile, has scrapped its planned $2 billion funding round, according to Bloomberg as reported by SiliconAngle, removing the near-term independent financing path that had been in place just days before the SpaceX announcement.</p><p>Whether the deal closes at $60 billion, or whether it ultimately resolves as a $10 billion collaboration arrangement, will depend on the outcome of SpaceX's IPO process and a range of factors that remain undisclosed. What is already clear is that the AI coding landscape has shifted significantly — and that Microsoft's decision not to pursue Cursor will be scrutinized for some time to come.</p><hr><p><strong>Tools that make you more productive aren't just corporate assets — they're personal ones.</strong> AI coding assistants like Cursor are redefining what individual developers and knowledge workers can accomplish in a day. At Moccet, we track the technologies reshaping how people work, focus, and perform — so you can make informed decisions about which tools belong in your stack. <a href=\"/#waitlist\">Join the Moccet waitlist to stay ahead of the curve.</a></p>", "excerpt": "Microsoft examined a potential acquisition of AI coding startup Cursor before SpaceX announced it had secured the right to buy the company for $60 billion, according to two anonymous sources cited by CNBC. The SpaceX deal, which came together in the final stages of a $2 billion Cursor fundraising round, gives SpaceX an option to acquire the company after its anticipated summer IPO. Cursor's annualized revenue crossed $2 billion in February 2026, with forecasts pointing to more than $6 billion by year-end.", "keywords": ["Cursor acquisition", "Microsoft AI coding", "SpaceX Cursor deal", "GitHub Copilot", "AI coding tools 2026"], "slug": "microsoft-eyed-cursor-before-spacex-60-billion-deal" } ```