Microsoft CEO Satya Nadella speaks at the Microsoft AI Tour event in Munich, Germany on February 25, 2026.
Sven Hoppe | Picture Alliance | Getty Images
Before SpaceX announced this week that it had won the rights to acquire Cursor for $60 billion. microsoft The company was considering a potential deal with an AI coding startup, two people familiar with the matter said.
Microsoft, which is trying to boost the popularity of its artificial intelligence tools to keep up with the rapidly growing market for AI tools, chose not to move forward with the bid, one of the people said. Both sources requested anonymity because the discussions are private.
While Microsoft is gaining traction among developers with GitHub Copilot, the AI coding market is currently dominated by Cursor, along with Anthropic and OpenAI. Microsoft’s main role in this space has been as an investor and cloud provider, pumping billions of dollars into Anthropic and OpenAI, which have committed to spending heavily on Microsoft Azure.
Microsoft declined to comment. A spokesperson for Cursor did not respond to a request for comment.
CNBC reported earlier this month that venture capital firms were preparing a loan for Cursor at a valuation of $50 billion, highlighting the surge in demand for tools that help users quickly assemble websites and applications.
Elon Musk’s SpaceX said in a post on X on Tuesday that it had agreed to a deal to buy Cursor for $60 billion by the end of the year, or else it would pay $10 billion for the company.
“SpaceXAI and @cursor_ai are now working closely together to develop the world’s best coding and knowledge work AI,” the company said in a post. “We’re excited to partner with the SpaceX team to scale up Composer,” Cursor CEO Michael Tuell said on X, referring to the company’s AI model.
The SpaceX deal came so late in Cursol’s fundraising process that prospective investors were caught off guard by the deal, one of the people said. SpaceX had provided computing access to Cursor in the weeks leading up to the announcement.
Musk merged SpaceX and his AI startup xAI in February in a deal worth $1.25 trillion, and is in the process of taking the combined company public in what is likely to be a record IPO.
Meanwhile, Microsoft’s stock price has fallen 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 paid subscribers, up 75% from a year ago.
OpenAI is promoting its own Codex programming app. CEO Sam Altman told X on Tuesday that Codex has reached 4 million active users less than two weeks after passing the 3 million mark. Anthropic’s Claude Code service has gained popularity this year, helping Anthropic reach $30 billion in annual revenue this month.
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