Microsoft Almost Bought Cursor — and That Story Is More Interesting Than the SpaceX Deal
SpaceX's $60 billion option to acquire Cursor grabbed all the headlines. But buried in the coverage is an equally telling detail: Microsoft was also in the running. The company that owns GitHub — the platform that hosts most of the world's code — was seriously evaluating an acquisition of the AI coding tool that's eating its lunch.
What's Actually Happening
Sources reveal Microsoft evaluated acquiring Cursor before SpaceX entered with its dramatic offer. Microsoft ultimately didn't proceed — for reasons that aren't fully clear — and SpaceX moved in with an option to buy for $60 billion, or pay $10 billion for a continued partnership.
This isn't just corporate gossip. It tells you exactly where the AI coding market is heading: every major tech player sees Cursor as a strategic asset, not just a product. The company is reportedly growing faster than almost anything in software history.
Why It Matters
Microsoft owns GitHub (acquired for $7.5 billion in 2018) and GitHub Copilot (the AI coding assistant built on OpenAI technology). Cursor is a direct competitor to Copilot — and by most accounts, winning. The fact that Microsoft was willing to consider acquiring Cursor rather than just competing with it says everything about Copilot's position in the market.
If Microsoft had bought Cursor, it would have owned both the dominant code hosting platform and the most popular AI coding tool. Instead, it potentially let a competitor (Elon Musk via SpaceX/xAI) gain that leverage. This connects directly to the broader SpaceX-Cursor story.
My Take
Microsoft passing on Cursor might be the most expensive non-deal in recent tech history. GitHub Copilot has been losing ground to Cursor in developer preference, and buying Cursor would have fixed that problem immediately. Instead, Microsoft may end up with a $60B valuation Cursor owned by a competitor that wants to build an AI empire.
The bigger question: what made the deal fall through? Was it price? Integration concerns? Regulatory worries? Or did Microsoft simply undervalue what Cursor was becoming? Any of those answers is a management failure worth examining.
Frequently Asked Questions
Why didn't Microsoft just build a better Copilot? GitHub Copilot has been iterating rapidly, but Cursor's UX and model integration have consistently been rated higher by developers.
Is the Microsoft acquisition off the table permanently? Nothing was formally announced, so it's unclear — but with SpaceX now holding an option, a Microsoft acquisition would require a competing bid.
What does SpaceX's option mean exactly? It gives SpaceX the right to acquire Cursor at a predetermined price for a set period — they're not obligated to buy, but they have the first move.