Just weeks after its initial public offering, Space Exploration Technologies (SPCX 4.51%), aka SpaceX, announced a major acquisition. The Elon Musk-founded space exploration and artificial intelligence (AI) company announced a further pivot toward the latter trend with its plans to acquire Anysphere, the developer of AI coding platform Cursor, in a $60 billion all-stock deal.
So far, this announcement has had a limited impact on SpaceX's stock performance. Shares were pulling back around the announcement and just after, but have started to bounce back of late. Let's take a closer look and see what a deal could mean for SpaceX, which is arguably as much an AI stock as it is a space stock.
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Why SpaceX "had" to buy Cursor
After exercising an option back in April, before it went public, SpaceX became obligated either to acquire Anysphere for $60 billion or else pay it a $1.5 billion termination fee and provide it with $8.5 billion in computing resources.
NASDAQ: SPCX
Key Data Points
But while SpaceX may have been more or less "obligated" to buy Cursor, the price tag may be far more reasonable than it appears at first glance. Given the rich valuation of SpaceX stock, even after its pullback, financing this as an all-stock deal costs existing investors fairly little in terms of dilution. Even if SpaceX prices the Cursor acquisition at its current stock price of around $164 per share, rather than the $200 per share or more it was trading at last month, that would mean a 365.9 million increase in the share count.
Considering SpaceX's current diluted share count of just under 13.2 billion, this means dilution of less than 3%. Having said that, while Cursor's acquisition price may seem like small potatoes compared to the company's more than $2 trillion valuation, it could have a tremendous impact on SpaceX's status as an AI contender.
A potential game changer, but it's still early
Once the acquisition closes later this year, SpaceX can begin integrating Cursor's AI coding tool into its own xAI platform. In turn, this could make xAI a more formidable contender against competitors such as Anthropic's Claude and OpenAI's ChatGPT. Still, while it's a potential game changer, expect this deal to have a limited impact on the narrative for now.
Why? For one thing, the deal's closing is months away, after which it will take time for SpaceX to integrate Cursor into its existing xAI ecosystem. Like other AI start-ups, Cursor also remains unprofitable. In the immediate term, this business will only add to SpaceX's overall losses. Moreover, even as this platform is one of the main names in the AI coding space and currently has reached over $2 billion in annual recurring revenue, the competition is heating up as rivals like Anthropic scale up their own AI coding products.
In light of all this, count on catalysts related to other key SpaceX assets and projects, like Starlink and Starship, to have a greater impact on the stock's performance for a while. Right now, SpaceX remains extremely pricey, trading at over 820 times estimated 2027 earnings. As such, you may want to wait for shares to become much cheaper or for further bullish developments to emerge before you consider buying.
