Microsoft looked at buying Cursor before SpaceX deal, sources say

Prior to SpaceX's announcement this week that it's obtained the right to acquire Cursor for $60 billion, Microsoft looked at a potential deal for the AI coding startup, according to two people familiar with the matter.

Microsoft, which is trying to boost the popularity of its artificial intelligence tools to keep pace in the booming market for AI tools, chose not to proceed with a bid, said one of the people. Both sources asked not to be named because the discussions were private.

While Microsoft has gained traction among developers with GitHub Copilot, the AI coding market is currently being dominated by Cursor, along with Anthropic and OpenAI. Microsoft's primary role in the space has been as an investor and cloud provider, pumping billions of dollars into Anthropic and OpenAI, which have committed to hefty spending on Microsoft Azure.

Microsoft declined to comment. A Cursor spokesperson didn't respond to a request for comment.

Venture capital firms had lined up financing for Cursor at a $50 billion valuation, CNBC reported earlier this month, underscoring the soaring demand for tools that can help users quickly assemble websites and applications.

SpaceX, controlled by Elon Musk, said in a post on X on Tuesday that it agreed to a deal to buy Cursor for $60 billion by the end of the year, or it will pay the company $10 billion.

"SpaceXAI and @cursor_ai are now working closely together to create the world's best coding and knowledge work AI," the company said in the post. Cursor CEO Michael Truell said on X that he's "excited to partner with the SpaceX team to scale up Composer," referring to his company's AI model.

The SpaceX agreement came together so late in Cursor's fundraising process that prospective investors were caught off guard by the deal, one of the sources said. SpaceX had offered Cursor access to compute in the weeks leading up to this announcement.

Musk merged SpaceX with his AI startup xAI in February in a deal valued at $1.25 trillion, and is in the process of taking the combined company public in what's likely to be a record IPO.

Microsoft, meanwhile, has seen its stock price drop 10% this year, underperforming the broader market and its hyperscaler peers.

CEO Satya Nadella told analysts in January that GitHub Copilot had 4.7 million paying subscribers, up 75% from a year earlier.

OpenAI is pushing its own Codex programming app. CEO Sam Altman said on X on Tuesday that Codex has reached 4 million active users, less than two weeks after crossing the 3 million mark. Anthropic's Claude Code service has gained popularity this year, helping Anthropic to reach $30 billion in annualized revenue this month.

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