OpenAI is ending its partnership with the AI coding startup Cursor, citing distrust of the company’s new owner, SpaceX. The artificial intelligence firm announced the decision Friday (Aug. 28), stating that the relationship was untenable due to its contentious history with SpaceX head Elon Musk.
Terms of Service Violations
The termination is driven by OpenAI’s experience with Musk’s companies, which it claims repeatedly break contract terms. “This decision was incredibly tough, as we care deeply about our models being broadly available for developers,” OpenAI wrote on its website. “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 plans to wind down its contract to provide models to Cursor, with a proposed shutdown date of Nov. 12. The company noted that it typically requires custom contracts for larger partners to ensure compliance and safety at scale.
The AI startup cited Musk’s 2022 acquisition of Twitter, now X, as a precedent for its concerns. “Under oath earlier this year, Musk admitted that xAI, now also part of SpaceX, had violated OpenAI’s terms of service (terms which are similar to xAI’s own),” the filing states.
Related: Billtrust CEO Targets B2B Trillion-Dollar Cash Gap
SpaceX acquired Cursor in June for $60 billion, shortly after the company went public. The deal was part of a broader strategy involving the merger of SpaceX and xAI, the AI lab behind the Grok chatbot, which valued the combined entity at $1.25 trillion. While the merger provided SpaceX with computing infrastructure, Cursor supplied a widely adopted AI coding tool with a large base of professional software engineers paying for the service.
Public Feud Escalates
Musk responded to the news on his platform X, writing that he “couldn’t care less.” He accused OpenAI CEO Sam Altman and Chief Strategy Officer Greg Brockman of being “utterly untrustworthy,” repeating his long-standing claim that the executives “stole an open source nonprofit.”
The public rift dates back to 2024, when Musk sued OpenAI, Altman, and Brockman. The lawsuit alleged that the company’s restructuring violated its founding commitments, a claim OpenAI disputed. Musk lost the initial suit but has announced plans to appeal the decision.
While the termination of the Cursor deal affects one customer, the legal battles and public statements from both sides suggest the friction between the companies will likely continue. The incident highlights the challenges startups face when integrating with organizations that have a history of contractual disputes with major AI providers.
