Microsoft Corp. had been reportedly eyeing AI coding startup Cursor before SpaceX made headlines with its $60 billion acquisition option of the company.

The Satya Nadella-led company’s interest in Cursor was part of its strategy to expand its artificial intelligence tools in the rapidly growing AI market.

However, the tech giant ultimately chose not to move forward with a bid, CNBC reported on Wednesday.

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Microsoft and Cursor did not immediately respond to Benzinga’s request for comments.

This revelation comes at a time when Microsoft is gaining steady momentum with GitHub Copilot. However, AI coding is currently led by Cursor, Anthropic, and OpenAI, with Microsoft mainly acting as investor and cloud provider via Azure. In its second quarter earnings call, Satya Nadella told analysts that GitHub Copilot reached 4.7 million paid users, up 75% year over year.

Cursor, on the other hand, is part of a new wave of startups that is gaining traction by using AI to automate coding tasks. SpaceX has now secured an option to either acquire Cursor for $60 billion later this year or enter a $10 billion partnership.

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Microsoft’s AI offering, Copilot, meanwhile, has been facing investor frustration due to limited traction despite its leadership in SaaS through 365 Commercial Cloud. Earlier this month, Nadella had initiated a “Copilot code red” effort to improve performance and user experience.

Copilot has also been lagging behind its competitors, with only 6 million daily active users in March, compared to Claude’s 9 million and ChatGPT’s 440 million.

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