Microsoft Explored Buying Cursor Before SpaceX Deal, Sources Say

Microsoft explored a possible acquisition of the AI coding startup Cursor before the company entered into a deal with SpaceX that includes an option to buy the startup, according to people familiar with the discussions.

The talks involving Microsoft did not result in an acquisition, the sources said. Cursor later moved forward with a SpaceX arrangement that has been described in published reports as a partnership and an option structure tied to a potential purchase.

Cursor is an AI-focused coding company whose products are aimed at helping software developers write and manage code. The discussions with Microsoft were preliminary and ultimately were not pursued to a deal, the sources said.

SpaceX, led by Elon Musk, is working with Cursor and has an option to buy the startup, according to earlier reporting. The reported figure attached to the option has varied across outlets, and the terms have not been publicly confirmed by the companies in the context provided.

Microsoft has been one of the most active large U.S. technology companies in AI, and it has also made AI coding tools a central part of its developer strategy. Any consideration of acquiring a fast-growing coding startup would reflect how intensely major tech companies are competing to secure talent, products, and distribution in software development.

For SpaceX, an arrangement with an AI coding company signals how AI tooling is increasingly being pulled into complex engineering and production environments. SpaceX builds and operates rockets and satellites, and any expansion of AI-driven software tools in those settings could affect how quickly teams ship software and iterate on systems.

The fact that Microsoft looked at Cursor before stepping away also matters because it underscores that AI coding tools have become major strategic assets, not just add-ons. Companies that control widely used developer platforms can push new AI features at scale, while smaller startups can become targets for partnerships or acquisitions as demand grows.

What happens next will depend on the details of Cursor’s ongoing work with SpaceX and whether the option to buy is exercised. That structure, as described in published reports, leaves open multiple paths: continuing as a partner, operating independently, or being acquired under the option terms.

Microsoft’s posture toward Cursor is also likely to be watched. The sources said the company dropped consideration of an acquisition, but Microsoft remains a key player in developer tools and AI, and it continues to compete with other firms seeking to embed AI into the software creation process.

Neither Microsoft, SpaceX, nor Cursor has publicly detailed the discussions or provided confirmation of the option terms in the context provided. For now, the reported sequence is clear: Microsoft evaluated Cursor, moved on, and SpaceX proceeded with a deal that could ultimately place the startup under its control.

The episode highlights how quickly AI coding startups can move from niche products to the center of high-stakes corporate strategy.