OpenAI Kills $1 Billion Cursor Deal Rather Than Do Business With Elon Musk

OpenAI terminated its partnership with Cursor — one of the most popular AI coding tools among developers — despite the arrangement being worth an estimated $1 billion or more in annualized revenue. The decision came after SpaceX, controlled by Elon Musk, acquired Cursor in a $60 billion deal. At the start of 2026, Cursor ranked in OpenAI's top five customers by revenue, and by spring the partnership was on pace to generate over $1 billion annually for the ChatGPT maker. OpenAI announced the breakup in a late-night blog post, citing an inability to trust that SpaceX would honor its terms of service — pointing specifically to its experience with Musk's companies violating contracts.

The core fear appears to be model distillation: OpenAI flagged that Musk appeared to admit during his lawsuit deposition against the company that xAI — now folded into SpaceX — had used OpenAI's models to train its own systems. That lawsuit, in which Musk alleged Sam Altman and Greg Brockman had effectively stolen a charity they co-founded, was dismissed by a federal jury earlier this year. The Cursor move signals that OpenAI, which now generates over $40 billion in annualized revenue across subscriptions, advertising, and its own coding tool Codex, is willing to absorb significant short-term financial pain to limit Musk's ability to exploit its technology.

Cursor CEO Michael Truell — who now leads teams at SpaceX following the acquisition — pushed back publicly on X, claiming OpenAI models account for only about 5% of Cursor's user traffic, implying the breakup would be a minor inconvenience at most. OpenAI's head of core products, Thibault Sottiaux, disputed that framing, noting that token traffic share is not a reliable proxy for either revenue or value created, and challenged Truell to explain the math behind the figure.

The fallout reshapes the competitive landscape in AI-assisted coding. OpenAI now competes directly with Cursor through its own Codex product, making the partnership's end strategically convenient even if financially costly. Meanwhile, Anthropic — which previously cut off rival coding startup Windsurf when OpenAI was rumored to be acquiring it — confirmed it will keep Claude models available inside Cursor. That decision is widely seen as pragmatic: Anthropic relies on SpaceX for $45 billion in data center capacity, giving Musk substantial leverage. The episode also underscores a notable irony — OpenAI was an early backer of Cursor through its startup fund, even approached the company about an acquisition, and prominently featured Truell in marketing for the GPT-5 launch. The two companies went from allied to adversarial in the span of a single acquisition.