OpenAI Ends Cursor Deal to Avoid Elon Musk

OpenAI announced it is ending its partnership with the AI coding startup Cursor. The decision, made to avoid doing business with Elon Musk, costs the ChatGPT-maker a customer projected to generate over $1 billion in annual revenue.

According to a late-night blog post last Friday, OpenAI will wind down the partnership. The company stated it cannot trust that SpaceX, which recently acquired Cursor in a $60 billion deal, will use its technology within OpenAI's terms of service. "We are making this choice because we cannot be confident that SpaceX will use our technology within our terms of service, based on our experience with Elon Musk's companies violating contracts," OpenAI said.

The Billion-Dollar Customer

Cursor has long paid fees to offer OpenAI's models within its popular coding editor. At the start of 2026, it was one of OpenAI's top five revenue-generating customers, according to people familiar with the matter. By this spring, OpenAI estimated the partnership would bring in more than $1 billion in annualized revenue based on its performance at that time. These figures highlight the significant financial loss OpenAI is willing to accept to sever ties with Musk's sphere of influence.

OpenAI declined to comment for this story. Representatives for SpaceX and Cursor did not immediately respond to requests for comment.

Competitive Tensions and Developer Relations

The split risks damaging OpenAI's standing with developers. The company acknowledged in its blog post that cutting off a major channel for accessing its models may harm its carefully cultivated relationship with that community. Cursor founder and CEO Michael Truell, now leading teams at SpaceX, responded publicly on X. He claimed OpenAI's models only "serve about 5% of Cursor user traffic," implying the loss would not meaningfully affect Cursor's business.

OpenAI's head of core products, Thibault Sottiaux, quickly countered that token usage is "not a proxy for revenue nor value created." He challenged Truell to "share the math" behind the 5 percent figure.

A Complicated History

The two companies have a long and intertwined history. OpenAI's startup fund was an early investor in Cursor, participating in its 2023 seed round. WIRED previously reported that OpenAI once approached Cursor about an acquisition, though talks never advanced. Despite OpenAI building its own Codex into a competing AI coding business, the firms operated as both partners and competitors for over a year.

That coexistence became untenable after SpaceX's acquisition. OpenAI may have determined the partnership was not worth the risk that SpaceX might distill its best AI models. The blog post noted that earlier this year, Musk seemingly said his xAI-now part of SpaceX-used OpenAI's models to train its own. This admission came during Musk's deposition in his since-dismissed lawsuit against OpenAI.

The Broader AI Model Landscape

Cursor is not abandoning third-party models entirely. Following OpenAI's announcement, Anthropic cofounder Tom Brown said his company would continue to make its Claude models available in Cursor. This decision contrasts with Anthropic's past actions; last year, it cut off the AI coding startup Windsurf when OpenAI was rumored to be acquiring it.

At that time, Anthropic cofounder Jared Kaplan explained, "It would be odd for us to sell Claude to OpenAI." The willingness to work with Cursor under SpaceX may be pragmatic. Anthropic depends on Musk's SpaceX for $45 billion of data center capacity.

As OpenAI prepares for a public offering next year, it is working to present a stable business less reliant on Musk's goodwill. The company reportedly now generates more than $40 billion in annualized revenue from subscriptions, ChatGPT ads, and Codex sales. Losing Cursor is a difficult but calculated move in that strategic shift.