SpaceX is gearing up for what looks poised to be the biggest initial public offering (IPO) in history. The company is expected go public in June at a valuation between $1.75 trillion and $2 trillion. Its first round of public share sales is projected to raise roughly $75 billion. Based on recent news, the company could wind up turning around and using most of the proceeds from its IPO to purchase an artificial intelligence (AI) coding specialist.

SpaceX said recently that it had signed an agreement that would allow it to acquire Cursor for $60 billion. Alternatively, the deal also leaves the door open for SpaceX to instead pay the AI coding specialist $10 billion for their work together. With SpaceX seemingly set to make IPO history in the next few months, what does the company’s deal with Cursor mean for potential investors?

Musk’s SpaceX bets big on Cursor

In a post on X announcing the Cursor deal, SpaceX CEO Elon Musk said that the two companies are working to “create the world’s best coding and knowledge work AI.” While SpaceX is best known for its rocket-launching and Starlink internet services, the company is also making artificial intelligence a big part of its growth strategy. Earlier this year, Musk moved to merge his xAI company with SpaceX.

Cursor’s core product is Composer — an AI software coding tool that helps developers test their code with documentation. SpaceX’s move to either acquire the company at a $60 billion valuation or pay $10 billion for its services represents a big vote of confidence in the coding specialist’s tech and an important development in Musk’s company’s approach to the AI race.

While xAI has solid footing in many aspects of the artificial-intelligence competition, it’s still behind Anthropic’s Claude and OpenAI’s Codex in some key respects. Through the partnership with Cursor, Musk is aiming to strengthen SpaceX’s competitive positioning in a crucial AI battlefield. Along with providing useful tools to software developers, the focus on building out AI coding technologies has the potential to support systems capable of self-improvement and deliver disruptive advantages.

According to sources cited by Bloomberg, it’s seemingly more likely that SpaceX will wind up purchasing Cursor outright than paying $10 billion for its services. Because Musk’s space company is on the verge of carrying out its IPO, it would need to resubmit key informational filings related to its public debut — a move that could potentially result in the delay of its initial public offering. Those sources suggested that the $10 billion figure that has been cited is actually a breakup fee if the acquisition were not to proceed. With such a high breakup fee relative to the planned $60 billion buyout price, SpaceX seems to be extremely bullish on Cursor’s capabilities and confident that the buyout will go through at some point.

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Is Musk gearing up for even bigger merger moves?

Notably, another one of Musk’s companies is set to report its first-quarter results after the market closes today. Some investors and analysts have speculated that Musk could move to merge Tesla (TSLA +0.30%) with SpaceX at some point following the latter company’s public market debut. Beyond potentially bringing Tesla’s electric-vehicle business into the fold, a merger would also combine the EV company’s robotaxi and Optimus humanoid robotics businesses with SpaceX and xAI.

While it’s impossible to state with any certainty whether Musk will ultimately move to merge SpaceX and Tesla, he’s clearly looking to build a complementary tech ecosystem across his companies. Even if a merger between Tesla and SpaceX never comes to fruition, the two companies will likely wind up doing significant amounts of business with each other in the future — and Cursor’s technologies could wind up seeing wide-ranging integrations.