Morgan Stanley’s Bullish Call: Cursor as the New AI Engine for SpaceX
SpaceX can deliver share gains of more than 100% thanks to a deepening footprint in artificial intelligence rather than its traditional space business, according to an upbeat note from Morgan Stanley. The Wall Street bank reiterated an overweight recommendation and set a $300 price target on the stock, which recently closed near its $135 IPO level from June 12.
The catalyst, analyst Adam Jonas argued, is the pending $60 billion acquisition of Cursor, a fast-growing AI coding-tool startup. The deal is expected to close within weeks and would follow SpaceX’s merger with xAI earlier this year, assembling a broad AI division that competes with OpenAI and Anthropic. Jonas called the coming months a “catalyst path” that is “shaping up elegantly.”
Cursor already counts more than 60% of Fortune 500 companies among its users, with 50,000 total enterprises on the platform. The startup disclosed in November 2025 that it had surpassed $1 billion in annualized revenue, a figure Morgan Stanley says is only the beginning. Because few investors are currently giving SpaceX’s AI business credit beyond its “neocloud” operations, the bank sees an upside-skewed revaluation as the Cursor story unfolds.
Wall Street’s consensus echoes the optimism: 29 of 36 analysts rate SpaceX a buy or strong buy. Shares have eased around 6% over the past month, leaving them a fraction above the June IPO price and offering what Morgan Stanley describes as a discounted entry point ahead of several upcoming value-unlocking developments.
Behind the Price Target: Why Cursor’s Enterprise Adoption Could Lift SpaceX Shares
The Cursor Asset and Its Enterprise Traction
Cursor’s tool is embedded inside thousands of development teams, a status that provides SpaceX an immediate AI revenue stream and a large installed base for future cross-sells. The $1 billion annualized revenue figure, disclosed late last year, already demonstrates commercial scale. Crucially, the platform is not a speculative prototype; it generates real topline growth that can be disclosed publicly after closing, which Morgan Stanley argues will force investors to reprice the AI segment.
Why the AI Business Is Undervalued
Jonas noted that very few investors are bullish on SpaceX’s AI business beyond its existing neocloud operations. That narrow perception creates a “valuation discount” that the bank expects to close as Cursor’s performance becomes visible. With the merger of xAI and the acquisition of Cursor, SpaceX is assembling a portfolio that spans infrastructure, training and developer-facing applications. If even conservative adoption figures for the coding tool are met, the current share price may significantly understate the AI unit’s worth.
The Lining-Up Catalyst Path
Morgan Stanley outlined a clear sequence of events that could push the stock higher: the Cursor deal closing in the coming weeks, subsequent updates on integration progress, and new model releases as the combined AI stack matures. Because these milestones are relatively near-term and largely within the company’s control, they offer tangible signposts that could shift sentiment. While risks around integration and competitive pressure from better-funded AI labs exist, the bank views the current risk/reward as skewed to the upside.
What SpaceX’s AI Pivot Means for Investors Now
- With the Cursor acquisition expected to close in weeks, investors will get the first concrete look at the deal’s revenue synergies and integration roadmap — factors that could immediately begin narrowing the valuation gap Morgan Stanley identifies.
- SpaceX shares remain near their $135 IPO price while 29 out of 36 analysts recommend buying; the $300 price target implies more than a doubling, suggesting that if the AI thesis gains traction, the risk/reward for new positions may be unusually attractive relative to consensus.
- Post-closing, watch for management’s disclosure of Cursor’s financials and any rollout of next-generation AI models, as these are the specific milestones Morgan Stanley believes will challenge the current discount on the AI business.
Risk & Opportunity Assessment
| Commercial Risk | Medium | The Cursor acquisition could fail to achieve expected revenue synergies or adoption growth if integration stumbles or enterprise customers slow their AI tool spending. |
| Competitive Risk | High | Cursor competes directly with AI coding assistants from OpenAI, Anthropic and others; any rapid feature or pricing pressure could erode its enterprise foothold and the re-rating narrative. |
| Regulatory Risk | Low | No specific AI-related regulatory headwinds are flagged in the report, though broad AI governance rules could emerge; for now, the risk is not an immediate overhang on the Cursor business. |
| Reputation Risk | Low | Cursor is widely used by blue-chip enterprise clients and has no public controversies; its reputation appears robust, but a high-profile coding error or data incident could change that. |
| Technology Disruption | High | The AI coding-assistant space is evolving extremely fast; a breakthrough from a rival or a shift in developer behavior could quickly commoditize Cursor’s offering before SpaceX fully reaps the re-rating benefits. |
| Commercial Opportunity | High | With 60% of Fortune 500 companies already using the tool, SpaceX can expand into related developer services and cross-sell xAI infrastructure, creating a multi-billion-dollar AI franchise if execution is strong. |
Comments 0