--- title: Elon Musk Tells Cursor Staff xAI Has Fallen Behind, Days After SpaceX's Record $60 Billion Deal description: Elon Musk told Cursor staff that xAI and Grok had fallen behind, days after SpaceX's record $60 billion acquisition of the AI coding company. author: Darie Nani (Editor-in-Chief) updated: 2026-08-25T17:18:01.064Z canonical: https://www.sovereignmagazine.com/article/spacex-cursor-acquisition-musk-xai-behind categories: Artificial Intelligence content_type: Analysis region: Global publication: Sovereign Magazine schema_type: Article --- Elon Musk paid more for a startup than anyone ever has, and then he told its engineers why: he is behind, and he plans to use them to catch up. In his first all-hands address to the staff of Cursor, delivered around August 15 after SpaceX closed its acquisition of the company's parent, Anysphere, Musk told the room that his flagship AI company, xAI, and its model Grok had fallen behind the leaders in the field. The account was first reported by The Information, citing five people familiar with the meeting, and has since been widely picked up. Musk had just completed the [largest acquisition of a venture-backed startup in history](https://qz.com/spacex-buying-cursor-anysphere-60-billion-deal-061626), an all-stock deal valuing Anysphere at $60 billion, and he used the moment to tell more than 1,000 new employees he was behind rather than to declare victory. Leaders at the frontier AI labs rarely concede ground in public, since a sense of position is part of what they sell to investors and recruits. Musk said it to his newest engineers, the staff with the most freedom to leave. ## SpaceX Outbid a $50 Billion Round to Take Cursor Cursor is an AI coding tool, and until this summer it was one of the hottest independent companies in software. Its valuation ran from $2.5 billion at the start of 2025 to $29.3 billion at its November Series D, and it was in the middle of raising roughly $2 billion more at a figure above $50 billion, with backers set to include Andreessen Horowitz, Nvidia, and Thrive Capital. SpaceX's $60 billion topped that round outright. Each Cursor share converts into SpaceX Class A common stock, and the deal closed in the third quarter of 2026. Several of the largest players in AI had already circled Cursor. Microsoft looked at an acquisition and decided against a formal bid, according to CNBC, and Cursor had rebuffed two approaches from OpenAI, having chosen to stay independent. SpaceX first secured an option to acquire the company for $60 billion, with a $10 billion payment for collaborative work as the fallback if it did not exercise, then moved to buy it outright and take it off the board at a premium. The two companies were already entangled. In the run-up to the deal, Cursor drew on tens of thousands of xAI chips to train its newest model, and two senior Cursor engineers left to join xAI. SpaceX had folded xAI into its operations earlier in the year, so the acquisition brings Cursor into the same house as Musk's model business rather than bolting on a separate one. ## Musk Told Staff Grok Has Fallen Behind What Musk told the all-hands explains the logic. He said Grok is not the leader in its market and needs to catch up, and he contrasted that with Tesla and SpaceX, which he described as dominant in their markets. The Information summarized his tone as that of someone who "wasn't used to losing," and reported that he described the Cursor staff as his way of playing catch-up. Musk also gave the acquisition a longer frame. He said AI models are sure to become too advanced for humanity to control, and that he therefore considers it necessary for SpaceX to build the technology before other companies do. That reasoning fits with the concession about Grok. If Musk believes the stakes are that high and that he is currently behind, a record price to catch up follows from his own logic. Musk also praised Anthropic and its Claude model during the meeting. Bloomberg has reported that xAI staffers who like to code have often reached for Claude rather than Grok. Praising a direct rival's product in front of his own engineers is unusual, and it points to how highly Musk rates Claude. ## Cursor Is Moving Onto SpaceX's Slack and Org Chart The integration is already underway. Cursor staff have moved onto a shared "SpaceXAI" Slack, its CEO now reports to Musk, and employees are being folded into SpaceXAI teams. Staff were urged to visit SpaceX's Silicon Valley headquarters and to read "Liftoff," the book about SpaceX's early days, a cultural onboarding as much as a technical one. A deal valued largely on people depends on those people staying. The Information reported that 45 Cursor staffers have departed since April, though the company has kept hiring and its total headcount has grown. Whether the culture Musk is importing keeps the engineers he paid so much for is not yet clear. SpaceX has not commented publicly on the account of the meeting. ## FAQ **Q: What is Cursor, and why does the AI model race matter to it?** Cursor is an AI coding tool that helps software developers write and edit code. Rather than building its own model from scratch, it runs on large AI models from other companies, so improvements in models like Anthropic's Claude, OpenAI's GPT and xAI's Grok feed directly into how well it works. That reliance is part of why owning it appealed to a buyer trying to close a gap in AI. **Q: Which AI does Elon Musk own?** Musk's AI model is Grok, built by xAI, which SpaceX folded into its operations earlier in 2026. With the acquisition of Anysphere, SpaceX now also owns Cursor. Cursor can run on models from several companies, so sitting under Musk does not tie it to Grok alone. **Q: What is Anysphere?** Anysphere is the startup that makes Cursor, and it is the company SpaceX actually acquired. It had grown fast, valued at $2.5 billion at the start of 2025 and $29.3 billion by its November funding round, before the $60 billion sale.