Comment by gpm
13 hours ago
Paying $10B for the option is also crazy though. Paying $10B for the thing outright and not just an option would be absurdly high.
13 hours ago
Paying $10B for the option is also crazy though. Paying $10B for the thing outright and not just an option would be absurdly high.
Is this cash or compute? Elon has one of the world's biggest compute clusters spun up, and little inference demand to speak of.
Trading billions worth of idle compute, in exchange for a high-strike call option on the #3 player in the most-promising-vertical for AI, plus (presmuably) some access to their data, starts to sound like not a bad trade. Especially if you're pre-committed to betting your entire rocket company on winning in AI, and you're currently in sixth or seventh place.
> you're pre-committed to betting your entire rocket company on winning in AI
SpaceX has invested a small amount as a share of its value in XAI, and could survive the loss of its investment.
I heard he made a deal with a company to use his clusters. Is there good data on demand for Grok? Seems like relatively little chatter at least, in spite of tremendous investment.
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If it's not in an 8K filing it isn't real.
Problem is basically, that if the option works out (Cursor truly has the talent to train a frontier model on SpaceX's infrastructure, and were simply lacking the infra before) the fair price would be way way more than $60B.
OpenAI tried to acquire Windsurf last year for $3B and couldn't.
Seems like Elon's move is two fold
1) A gamble based on cursor's compute constraint 2) if 1) plays out, he can purchase cursor via shares of spaceX over valued shares, at a fixed price should the valuation increase.
> Cursor truly has the talent to train a frontier model on SpaceX's infrastructure, and were simply lacking the infra before
Wild conjecture.
I think this was an “if” scenario
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Is that so or would those 10B be discounted from the purchase?
not that it isn't wild regardless
I'm not sure what you're referring to by "that" but I think you're right that it's 10B to not purchase or 60B to purchase, so as an option posting $10B for an option with a $50 strike price.
It reportedly has a $2B ARR, and a 5x multiplier doesn't seem insane to me, but who knows, honestly
But it's paying a 5x ARR multiplier for the right to buy at a 30x multiplier.
They have 2B ARR because their business model is about selling models cheaper than they cost.
The main frenzy with Cursor started when you could access Anthropic models practically for free.
Otherwise it is just VS Code.
> Otherwise it is just VS Code.
This is a bit simplistic. It's the VS Code that everyone used before cc came to town. Real devs, on real projects. All that data they collected is worth a lot more than "just vscode". Their composer2 is better than kimi2.5 and it's just a finetune on that data.
xAI had a decent model in grok4 (it was even sota on a bunch of benchmarks for a few weeks), but they didn't have great coding models (code-fast was ok-ish but nothing to write home about, certainly nowhere near SotA). Now that they've been banned from using claude, they'll get their expertise + data to build a coding model on top of whatever grok5 will be + their cluster for compute.
It doesn't sound like a bad plan to me, financial shenanigans or not.
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xAI needs a dev tool to compete with Codex and Claude Code.
Cursor needs their own 1st party backend model.
Sounds like a match made in heaven.
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2B ARR at what cost base?
But they also get a whole bunch of AI Services from Cursor. Other comments have noted that xAI has fallen on bad times (idk one way or the other) so perhaps they were going to spend $5B on getting these services elsewhere, anyway.
SpaceX spending $1B a month on various AI services seems ~plausible
(EDIT - Or maybe it's an IP transfer, or maybe it's over a longer time horizon. Idk but SpaceX clearly expects value from 'our work together' even if they don't exercise.)
$1B per month on AI services does not seem remotely plausible to me... Engineers don't consume that many tokens...
And on the AI development side they're the ones providing compute in the form of a "million H100 equivalent Colossus training supercomputer"... On top of the cash.
Cursor has no AI services, they do not develop their own frontier models. I see no reason to understand why $10bn for Cursor's services is an advantage xAI versus say a $10bn deal with Anthropic, OpenAI or Google.
It's true that Cursor doesn't have their own frontier models, but they are training their own models. They just aren't at frontier level yet. The $60B/$10B deal looks like a bet that this is a capital/GPU constraint rather than a capability one.
Those other companies wouldn't also toss in a purchase option.
But I agree that it's hard to articulate what Cursor services you could blow this much money on.
Maybe it is all just an option! Or maybe they get a bunch of IP either way?
Plausible how? Explain please.
Tokens. Tokens spawning sub agents using more tokens. Maybe some training too.
I didn't say it was Wise.
I said it seems within possibility for this, very particular, corporation.
Not only is it almost certainly compute (“services”) it’s likely priced at Anthropic rack-rate, or at least what Cursor’s been paying Anthropic.
The cluster’s already paid for, so likely in the $2B range for operating cash needs. Not more than $5.
If I imagine bringing in Cursor’s team to build a frontier model, ideally combined with Grok, which has one of the few truly proprietary data feeds available to it, and with a much larger custom model Cursor can solidify a place, and I get to do a stock swap to buy it, this sounds like a bet worth making.
Upshot - I bet there’s an MS/oAI deal on IP on the back of this; meanwhile the cluster goes brrr.