Morgan Stanley believes SpaceX's acquisition of the AI coding tool Cursor marks a pivotal step in building an end-to-end enterprise AI platform, and that the current stock price implies an extremely conservative valuation for its AI business, with significant upside potential.
In a research report dated August 10, Morgan Stanley stated that even after a recent rally of over 25%, SpaceX still has more than 100% upside potential to its $300 base target price. In a bull-case scenario, the target could reach $600, implying a potential gain of nearly 350% from the current price of around $140. The core argument of the report is that the market is currently pricing SpaceX's AI operations extremely conservatively, treating it as an ordinary emerging cloud service provider rather than a developing end-to-end AI platform.
Morgan Stanley analysts, led by Adam Jonas, noted that if the value of SpaceX's space and connectivity business (approximately $127 per share) is stripped from the current stock price, the market's implied valuation for its AI business (including consumer and enterprise AI) is only about $12 per share. This corresponds to a 2028 enterprise value-to-sales multiple of just over 1x, which is even lower than the valuation levels of comparable emerging cloud service providers. The report believes that as progress related to Cursor and Grok continues to be disclosed, this valuation discount is expected to narrow gradually, forming a catalyst path with upside bias.
Morgan Stanley forecasts that Cursor's annual recurring revenue (ARR), which stood at roughly $4 billion in early June 2026, will grow to about $8 billion by the end of 2026, $17 billion by 2027, and reach approximately $33 billion by 2030. Cursor is projected to contribute about $2.5 billion in revenue for SpaceX in 2026 and $13 billion in 2027, accounting for roughly 19% of SpaceX's total AI revenue.
Why SpaceX Acquired Cursor for $60 Billion
On June 16, SpaceX announced its acquisition of Anysphere for $60 billion in an all-stock deal, which is expected to close in the third quarter of 2026. The two companies had previously begun collaborating in April 2026, with SpaceX and xAI opening the Colossus data center to Cursor for model training. Cursor stated that its development roadmap had previously been constrained by computing power bottlenecks.
Morgan Stanley outlined three strategic rationales behind SpaceX's acquisition of Cursor. First, computational leverage. Cursor has a developer workflow but still relies on third-party frontier models for many agentic coding tasks. SpaceX's Colossus cluster can help Cursor expand its proprietary model capabilities, reduce dependence on external AI labs, and lower per-token costs through vertical integration. Second, proprietary coding data and feedback loops. Cursor has accumulated real-world developer usage data covering 50,000 enterprises, including 64% of the Fortune 500. This data asset can provide stronger model iteration feedback for SpaceX and xAI in the enterprise AI competition. Third, a foundational product for building a broader enterprise ecosystem. Morgan Stanley believes that the acquisition of Cursor is just one part of SpaceX's broader plan to build a larger enterprise AI ecosystem. In the combined SpaceX enterprise platform, Cursor provides the application layer and workflow, Grok provides the core intelligence layer, X platform provides real-time data, SpaceXAI provides computing infrastructure, Starlink provides global connectivity, and Tesla provides a path to physical AI.
The report specifically noted that its $33 billion ARR forecast for Cursor in 2030 does not assume the realization of these synergies. Cursor is the flagship product of Anysphere, officially launched in March 2023. Built on Microsoft's open-source Visual Studio Code, it offers AI-native code writing, editing, debugging, and review functions. Cursor is not a pure model company; its core value lies in the workflow interface layer, which can invoke various large language models, including Grok, Gemini, and its proprietary Composer series. To date, Cursor has served over 50,000 enterprises, covering 64% of the Fortune 500, with clients including Samsung, Adobe, Figma, Stripe, and Nvidia. In terms of revenue growth trajectory, Cursor's ARR ramp-up speed is among the fastest in software history, growing from $100 million in January 2025 to $5 billion in June 2025, $1 billion in November 2025, $2 billion in February 2026, and approximately $4 billion in June 2026, representing an eightfold increase in one year. Enterprise B2B customers contribute about 75% of ARR, making them the primary revenue source.
Model Strategy: Betting on Cost Efficiency Rather Than Pure Performance
Morgan Stanley believes that Cursor and SpaceXAI's model strategy is clearly focused on the Pareto frontier of cost and efficiency, rather than pursuing the top of raw performance leaderboards. From a product architecture perspective, Cursor is divided into two layers: a model-agnostic workflow interface layer, and its proprietary Fusion and Composer series models. Grok 4.5, the first model jointly trained by the two parties, scored 64 points on the Artificial Analysis coding agent index. Its cost per task is about $2.59, while top-tier frontier models cost over $7 to $8 per task. Cursor's proprietary Composer 2 and Composer 2.5 models cost only $0.04 to $0.08 per task, with token consumption about one-eighth that of the most heavy-duty frontier models.
ARR and Gross Margin: From Deep Losses to the Low 60% Range
Morgan Stanley built a bottom-up revenue and gross margin model for Cursor, detailed quarterly through 2027 and annually extending to 2030. In terms of revenue drivers, the enterprise segment contributes about three-quarters to four-fifths of ARR. The number of enterprise customers is expected to grow from 50,000 in the second quarter of 2026 to 138,000 by 2030, while paid seats are projected to increase from 3.3 million at the end of 2026 to 7 million by 2030, corresponding to a global professional developer penetration rate of about 15.8%. Individual paid users are expected to grow from about 3.6 million at the end of 2026 to about 6.2 million by 2030.
Regarding the gross margin path, Cursor has historically been in a state of negative gross margins, primarily because the usage included in subscription revenue requires paying token fees to third-party AI labs, resulting in extremely thin spreads. The gross margin for the January 2026 quarter was reportedly around -23%. As Composer and Grok handle more inference workloads, and as the usage of cheaper third-party models increases, Morgan Stanley expects gross margins to turn positive in the third quarter of 2026 and reach the low 60% range by 2030. In terms of computing power, Cursor is expected to consume 7% to 10% of SpaceXAI's total computing power, but its revenue per watt intensity is about twice that of SpaceXAI's average workload. This reflects the advantages of a high-margin subscription model compared to leasing computing power and consumer Grok inference.
Enterprise AI Spending: Penetration Still Low, Significant Growth Potential
The acceleration of enterprise AI spending provides a vast market space for Cursor. Citing Ramp AI Index data, Morgan Stanley noted that enterprise AI spending is expanding rapidly, but overall penetration is still in its early stages. As of June 2026, the median monthly AI spending per US enterprise employee was about $11, up 167% year-over-year. The top 10% of companies spent $516, and the top 1% exceeded $4,880, with both segments growing about 240% to 250% year-over-year. However, nearly half of US enterprises have not yet paid for any AI tools. The adoption rate is about 65% for large enterprises, 61% for mid-sized enterprises, and only 49% for small enterprises. The adoption of coding AI shows similar characteristics. According to Jellyfish data, as of June 2026, the median engineer already holds an AI coding tool license, and the license coverage rate for the top quarter of enterprises is close to 90%. However, only about 28% of delivered code at the median enterprise is completed with the help of AI, a figure that was near zero a year ago. Morgan Stanley believes the gap between tool adoption and actual production usage is narrowing quickly, and the coding AI spending curve still has a long upward trajectory.