MW Social media declared Cursor dead. Then SpaceX handed the AI startup a $60 billion lifeline.
By Christine Ji and William Gavin
Written off after the rise of Anthropic's Claude Code, Cursor now looks to reclaim its crown as a vibe-coding heavyweight with SpaceX's backing
SpaceX and Cursor have been jointly training a new AI model utilizing SpaceX's Colossus supercomputer cluster.
Cursor had a rough start to 2026.
The AI coding startup once garnered lavish praise for its explosive revenue growth. When prominent AI researcher Andrej Karpathy coined the term "vibe coding" in early 2025, he gave an explicit shoutout to Cursor. But faced with a barrage of AI coding agents hitting the market - most prominently, Anthropic's Claude Code - Cursor CEO Michael Truell called an emergency all-hands meeting in January.
The situation was dire. Posts bearing titles such as "What happened to Cursor?" and "Cursor is dead" proliferated on social media. Five months after the emergency all-hands, Cursor still isn't in the clear; just 14% of employees using AI at work use the tool, according to UBS. But the company's fortunes may soon be changing, thanks to SpaceX's $(SPCX)$ $60 billion acquisition of Cursor's parent company Anysphere.
Now, Cursor has access to the treasure trove of computing power offered by SpaceX's Colossus data centers and fresh capital to continue developing its platform and proprietary coding model Composer.
Cursor has been "bottlenecked" by its need for computing, according to the company. SpaceX, meanwhile, has enough capacity that it's selling access to its GPUs to both Anthropic and Alphabet $(GOOG)$ $(GOOGL)$. Anthropic alone has been given access to 325,000 Nvidia (NVDA) graphic processing units in SpaceX's data centers, or more than all of the capacity in Colossus I.
Cursor has already been given access to "certain" GPU capacity, according to SpaceX, which insists it has "sufficient capacity" to support its own models. A new model developed jointly by Cursor and SpaceX is also in the works and will launch on both Cursor and Grok Build.
The acquisition, which was announced this week, is expected to close in the third quarter of 2026. The deal builds on an April agreement between the two companies that granted SpaceX the opportunity to execute a buyout.
"Cursor is in a very strong position to pull away from the pack," Arnal Dayaratna, research vice president of software development at IDC, told MarketWatch. "The sky is the limit for Cursor now."
Cursor, unlike frontier labs such as Anthropic and OpenAI, focuses solely on coding. Users open up a gray pane that displays their file directory, lines of code and a chatbot window, where they can select their AI model of choice.
"What's important about this acquisition is that it empowers Cursor to develop its own internal models further," Dayaratna said. The company has deepened its focus on Composer in recent months, aiming to catch up to and reduce dependency on frontier labs. Providing access to different models has been a financial strain for the startup, requiring Cursor to pay hefty API fees to the foundation models. According to a Business Insider report, Cursor once comprised up to half of Anthropic's total revenues.
Following the emergency meeting earlier this year, Cursor began pushing out rapid-fire upgrades to Composer. On Tuesday, Truell showcased the company's latest 1.5-trillion-parameter model at Cursor's Compile developer day, trained from scratch on over 100,000 Nvidia GPUs. The company had built earlier versions of Composer on the Chinese company Moonshot's open-source Kimi K2.5 model due to computing constraints.
"Without the frontier model, without the compute resources, it was very hard for Cursor to compete. But again, they still had something unique," D.A. Davidson analyst Gil Luria said regarding Cursor's singular focus on coding. With the backing of SpaceX's data centers, the company intends to "scale up Composer," Truell said in an April X post.
As a coding-centric application, Cursor actually has a leg up compared to general AI models, IDC's Dayaratna said. Scaling intelligence in one dimension is a much more efficient engineering task than trying to build a multimodal model with capabilities across writing, coding and image generation. Anthropic's own research revealed that tuning its Opus 4.7 model to be less verbose inadvertently resulted in a drop in coding intelligence. The company said that issue was resolved in April.
Cursor "understood the value of focusing on just the coding aspect of AI very early on," Luria said.
Cursor may be the 'best' for coding
Even as Cursor hones in on Composer, the company's model-agnostic platform remains a key selling point, according to Ram Bala, professor of AI and analytics at Santa Clara University.
"There is this sort of narrative about Cursor actually losing ground in some ways, and I honestly have to push back on that a little bit," Bala told MarketWatch. Much of the traction with Claude Code and other coding agents comes from their accessibility to "non-technical" users, according to Bala.
"Cursor, given its flexibility to switch underlying models, offers technical developers more options in terms of how to work with their code," Bala said. Following the acquisition, Bala wonders if SpaceX will maintain Cursor's popular multi-model offerings or integrate Cursor directly into Grok. The latter option could result in backlash from Cursor's existing user base.
"That's a possibility," D.A. Davidson's Luria said. "But [Elon Musk] could go either way, and he could do both things too."
In Bala's experience as a professor and founder of enterprise AI-agent startup Samvid AI, "most AI engineers prefer actually using Cursor to other tools because it gives them a lot more control."
Among them is Ben Skoog, founder of AI-agent startup Aimdoc, who has been using Cursor since its 2023 launch. "It's absolutely important to build your AI infrastructure such that you can use different models from different providers, because if you get locked in, one provider change can screw you over," Skoog told MarketWatch.
He's tried Claude Code before but prefers Cursor's indexed codebase, which allows users to query a multi-file project in natural language and find relevant code.
"Cursor started with the developer experience and they go backwards," Skoog told MarketWatch. "If you look at Claude Code, they're going the exact opposite direction. They start with the base model and they go into the experience. Cursor's raw coding model is probably going to be the best for coding, I would suspect."
Developers and enterprises like using Cursor because of its cost-effective AI product, according to Ara Kharazian, lead economist at Ramp, a financial-technology company tracking how businesses spend on AI. Unlike Anthropic and OpenAI, which Kharazian said are incentivized to make users spend as much as possible on tokens, Cursor allows users to toggle between smarter but more expensive models and cheaper alternatives.
"I think Cursor is well positioned to respond to that demand for cost effective AI products in a way that right now the model companies are not providing...frankly, the model companies aren't well positioned to provide anyway," he added.
-Christine Ji -William Gavin
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(END) Dow Jones Newswires
June 19, 2026 07:30 ET (11:30 GMT)
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