xAI advises its employees to minimize interactions with Cursor staff.

      TL;DR: xAI’s general counsel has advised employees to limit interactions with Cursor staff weeks after the two teams started collaborating, raising concerns about potential antitrust violations ahead of a $60 billion acquisition linked to SpaceX's upcoming IPO. Elon Musk's xAI instructed its employees to minimize contact with Cursor, an AI coding startup that SpaceX may acquire. James Burnham, xAI's general counsel, issued this directive, emphasizing that interactions should only pertain to the previously announced technical partnership. However, the two teams have been working together for weeks, with legal guidance arriving after collaboration began. US antitrust laws prohibit premature merging of operations, and violations could jeopardize the acquisition. Employees were reminded that their communications could be scrutinized during regulatory reviews, putting the deal at risk if evidence of improper collaboration arises. Under the new guidelines, xAI engineers may share data and code for joint projects but cannot utilize Cursor’s resources for unrelated tasks. Both companies can employ each other’s intellectual property solely for developing their joint model. This warning coincided with SpaceX’s filing for an anticipated record IPO. SpaceX, which merged with xAI in February, plans to list under the ticker SPCX, aiming for a valuation around $1.75 trillion. SpaceX has the option to acquire Cursor within a month after going public, or face a $10 billion breakup fee if it doesn't proceed by the end of 2026.

      The antitrust guidance adds complexity to xAI’s already disorganized operations. Michael Nicolls, a SpaceX VP, now oversees much of the engineering for what Musk calls SpaceXAI. Nicolls has stated that the company is lagging behind its competitors. Internal staffing issues persist, with Musk mandating layoffs in March due to dissatisfaction with xAI’s coding performance. All co-founders have vacated the company, and while new hires are being made, layoffs continue, causing operational delays and unprocessed requests. A notable example of this dysfunction occurred when xAI promised employees $420 for their personal tax returns as training data for Grok, but two months later, no payments have been made, and the program’s manager has since left.

      For Cursor, the situation is precarious. Having achieved $2 billion in annual recurring revenue by February 2026, making it the fastest-growing B2B software company, Cursor is cautious about engaging with xAI's turmoil as the acquisition approaches. The antitrust risks are manageable if both entities adhere to regulations moving forward. A pressing concern is whether xAI, which struggles to meet even minor financial commitments and has experienced significant turnover, can successfully handle a $60 billion acquisition shortly after its IPO. The success of SpaceX’s post-IPO Cursor deal hinges on effective execution, an area where xAI has faced considerable challenges.