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

OpenAI has ended its partnership with Cursor, the wildly popular AI coding editor, explicitly because Elon Musk's SpaceX acquired the startup in a $60 billion deal. The breakup is a dramatic financial sacrifice: by spring 2026, OpenAI estimated Cursor would generate more than $1 billion in annualized revenue — making it one of the company's top five customers at the start of the year. OpenAI walked away anyway, citing an inability to trust that SpaceX would honor its terms of service, pointing specifically to evidence that Musk's companies had previously violated contracts and that xAI — now folded into SpaceX — may have used OpenAI's models to train its own AI, a claim that surfaced during Musk's since-dismissed lawsuit against OpenAI.

The financial stakes are real but increasingly manageable for OpenAI. The company now reportedly generates over $40 billion in annualized revenue across subscriptions, ChatGPT advertising, and its own AI coding product Codex — meaning a billion-dollar hit, while painful, won't sink the ship. Still, OpenAI itself acknowledged in its announcement that cutting off Cursor damages its credibility with developers, a community it has spent years cultivating. The two companies have a particularly tangled history: OpenAI's startup fund was among Cursor's first investors in 2023, OpenAI once explored acquiring Cursor outright, and Cursor's founder Michael Truell appeared in OpenAI's own marketing for the GPT-5 launch as recently as summer 2025.

Truell, now running teams at SpaceX, fired back hours after OpenAI's announcement, claiming OpenAI models only handle about 5% of Cursor's user traffic — a figure seemingly designed to minimize the blow. OpenAI's head of core products Thibault Sottiaux pushed back hard, noting that token traffic share is not a proxy for revenue or value, and publicly challenged Truell to show his math.

Anthropicis stepping into the void, with cofounder Tom Brown confirming Claude models will remain available inside Cursor. But the move isn't purely altruistic — Anthropic depends on SpaceX for $45 billion worth of data center capacity, giving it powerful incentive to stay in Musk's good graces. That's a stark contrast to Anthropic's behavior just last year, when it cut off rival coding tool Windsurf the moment OpenAI was rumored to be buying it. The episode illustrates how thoroughly Musk's expanding empire is reshaping alliance structures across the AI industry, forcing companies to choose sides in ways that carry serious financial consequences.