Wow. Tech CEOs and investors have completely lost touch with what money really is worth.
How is a VSCode fork and a open weight LLM fine-tune worth $60B?
One would think Elon would learn his lesson after overpaying for Twitter and then having to merge his failures together to stay afloat. But no, more cash into the burning pile.
> How is a VSCode fork and a open weight LLM fine-tune worth $60B?
Ignoring future business ideas, Cursor reported reached $2 billion+ annualized revenue run rate in 2026, doubling from 2025. Recent financing rounds reached high-end valuation between $30 billion and $50 billion.
Revenue without expenses is meaningless. Annualized revenue is even worse. It's like a gambler bragging that they spin through $20,000 a month. Yeah, but for how long?
If you give me a billion, I can do an annualized revenue run rate of ~$12 billion just by selling a dollar for 99 cents.
“annualized revenue run rate” is a bogus accounting term. It’s like taking a paycheck and multiplying it by 365. Notice the complete lack of any mention of profits.
Taking my paycheck and multiplying would be an excellent measure of my yearly salary. I don't understand how that analogy is meant to imply that the approach is nonsensical.
But then the analogy doesn't work at all? ARR isn't calculated by multiplying revenue to 30 years and then saying that that's 1 year's revenue; what criticism is being made here?
they pick some month with the higest revenue. Unlike your income, a business makes different amounts each month based on some trends and many other factors, and they can varry wildly.
I'm talking about per-request model remember? With extensive prompt you realistically can have one request every 10 minutes because the agent will be busy for at least 10 minutes executing it. They aren't rate limiting that.
yeah i just canceled my cursor sub and switched back to vscode. work pays for my claude max sub, no point paying for cursor anymore when i can just use openrouter every few months to test other models if i want
I mean the best argument I see for cursor is that you can easily switch between AIs, which is convenient since they seem to run at 80-90% up time (with those 10-20% clustered at West coast working hours). But the big AI companies are likely to keep an edge over Open-source fine-tunes and they are able to subsidize the coding agents in a way Cursor can't.
To add to this, Cursor provides a high value go to market strategy for X.AI's modeling efforts. Cursor's own modeling efforts would require an extreme investment of capital to compete. Capital which X.AI has already spent or is planning to spend.
I don't think we can use normal valuation methods for these AI companies.
Things are moving so fast, and these companies have no moat whatsoever. Purchasing a company for 30x annual revenue (and as others have pointed out, how much of this revenue goes straight to companies like Anthropic?), without knowing if it's even going to exist in 3-5 years, seems bonkers.
I mean, congratulations to the founders on becoming billionaires in record time, but this is uncharted territory.
I don't think it's about worth any more at this point; it seems more about money laundry and manipulating the market. They are shifting power between each other and create an illusion of a healthy economy, not carrying about the damage they create for everyone else.
And not also the people who think that acquisitions are being made primarily because colluding CEOs have some interest in creating the illusion of a healthy economy?
Yes, and Whatsapp was just a messaging app with a stupid Erlang backend. These deals are not about the tech, they buy the business, that includes the brand and the user base. Whether we think it's worth that amount is indeed up for discussion.
Whatsapp was much much more at that point. It also had a huge userbase at a time when getting such a number of people was incredibly difficult. Many were also paying the $1 per year fee. Switching from Cursor to Kilo etc. takes nothing. There are no "friends" you need to convince to switch.
I feel like people are underestimating the market share of Cursor.
The value in acquisitions for investors typically comes from how much money is locked into multi-year deals. A lot of tech folks in leadership positions that I talk to are very aware that the best option in this space changes every 2 months. Right now it's Claude. Next month it might be Codex. A couple months after that it could be Gemini/Qwen/Composor/Kimi/xAI.
Locking in with Cursor where quick swapping your team between the changing options is the point is a better choice than locking in even a 1 year deal with any single option where you're still going to be paying for token cost on top of it.
> And it was "only" ~$20 billion. Inflation can't be this high.
While I'm not sure about this buy, Cursor does at least have revenue. WhatsApp was basically running on VC/private money (they had an extremely nominal fee, but I never had to pay it), and was sold to buy its userbase into the Facebook fold. I don't think you can compare that to a business that at least has some decent revenue.
If Whatsapp is burning through say ~$1B yearly with zero revenue and Cursor is burning through say ~$2B with a ~$1B revenue, they're both still in the hole.
I wish people would stop talking about just revenue. It's mostly meaningless without knowing their expenses.
I think revenue is common to talk about because profit is also meaningless when a company spends every penny it earns to grow (new engineers, marketing, etc). Iirc Amazon made zero profit for quite some time.
Also revenue is a signal for product market fit. Is it a great one? Dunno. But for example I'd be hard pressed to sell $1billion of anything, even if I had something everyone wanted.
But I think your point about burn rate is important. How long can they have this attrition on cash before they collapse?
I mean, the financials just don't look great either way.
Their main product is part VSCode, which is a market that's almost impossible to make money in, and part reselling already expensive LLM tokens.
You can look at more parameters and judge how well a company could do in the future. For Amazon, you can predict that once they stop growing, they can make a pretty penny.
But with Cursor that doesn't seem likely. Even if they had the talent for training models from scratch, which I don't think they do, and IF inference makes money, which is not clear at all, training models is still a huge money sink.
So, for them getting bought out by xAi which has a base model they can use makes sense. But what does xAi get here? Another endless money pit?
You're right. I was commenting mostly on "why companies usually talk about revenue than profit"
I think the truth is that it's a new frontier. No one knows if any of this will make money. Investors are just betting that someone else will learn to monetize sometime soon.
The cost of switching from WhatsApp to an alternative is huge. You will lose access to your family, friends, whomever you chat with. They need to switch with you and in turn their friends need to switch with them, and so on.
The cost of switching from cursor to codex or Claude code is minimal.
So what does Claude code actually have that spaceX can't imitate? Well, not much, but acquiring hot companies before your IPO is a good strategy to drive up your own valuation.
(non-chinese) asian equivalent of whatsapp is still whatsapp, it completely dominates in some of the biggest asian countries like india, indonesia or pakistan along with a bunch of other smaller places
> How is a VSCode fork and an open weight LLM fine-tune worth $60B?
Corporate contracts. A lot of companies have signed onto Cursor. xAI has a pretty toxic brand with Elon and the nonconsensual sexual images scandal. xAI has a ton of compute and few corporate customers. Now they have a ton.
> One would think Elon would learn his lesson after overpaying for Twitter
I think he took over Twitter to control what people using it see and promote right wing viewpoints. To that end it’s been a wild success.
> Wow. Tech CEOs and investors have completely lost touch with what money really is worth.
Remember those stories of lottery winners who win millions then wind up broke AF, even homeless, in only a year or two because they have no impulse control and blew through it? Same people.
It's not the codebase they're purchasing, it's the customer list, R&D talent, and most importantly, data corpus.
X AI is weak on coding and most of their founding researchers have departed for greener pastures. Musk has a great datacenter, but no researchers or data to use it with. This acquisition makes sense in that context.
You have to look at it now like cryptocurrency “market cap” numbers. It’s more of a marketing tool than anything. This is just another honking whirlygig to bolt onto the SpaceX IPO to try and generate exit liquidity
Let's face it - Grok is not nearly as popular among programmers as Claude or Codex, and that means that xAI is not able to vacuum all the data that his competitors have access to.
Cursor is installed on a LOT of computers.
Once Grok becomes the default engine, it will raise adoption.
More importantly, if you have Cursor installed all your data may be sent to their labs whether you use it or not (unfortunately - this is par for the course for all the LLMs, a la Microsoft).
That's worth a lot - especially considering that Cursor might also grow with the shift to more powerful local models and the fact that it has a respectable income stream.
> How is a VSCode fork and a open weight LLM fine-tune worth $60B?
The same way a rocket company that counts short-lived as satellites as an asset is worth 1.7 trillion. Congratulations to the Cursor folks, they are the only winners in this.
This is also part of the AI bubble delusion: agent assisted coding works, at least for some people, for some purposes. This deal perpetuates the illusion that AI will find high value use cases. The reality may be that software development has unique characteristics you won't find in law or medicine or other domains.
Buying Twitter played a key part in getting Trump re-elected, so I think Musk figures he got what he wanted in terms of deregulation, dropped prosecution, and damage to his political opponents.
This deal is different: SpaceX is heading for an IPO which is now complicated by xAI becoming a subsidiary. Cursor is actually popular and I’m sure this is all stock-based so as long as investors believe that those users stick to xAI it’ll juice the entire SpaceX IPO. I am skeptical but these days the market seems to be driven by a country-club full of guys in Connecticut who are constantly hyperventilating on X so maybe from that angle it’s just another way he’s getting what he wanted from Twitter.
Quoting a viral tweet:
“Elon is such a dumbass, he spent $44 billion on Twitter and all he got was control of all 3 branches of the federal government.”
He bought his way into politics, came in with a chainsaw (almost literally), realized he didn't want to be in politics after all and rage quit. It may not make him a dumbass, but it certainly makes him some sort of ass.
Buying Twitter played a key part in getting Trump re-elected
Some would say it was simply caused by the mediocrity of Bidden and more globally of the democrats. You don't need to brainwash people for this.
Sure, and many of those would be saying it because of something they heard on X. Musk didn’t pour money into political activity because he thought that outcome was highly likely.
He bought Twitter to grab a megaphone to propagate his ego/agenda.
Grok was built for similar reasons.
He's buying Cursor to have a tool to push Grok on the world, and to have something of his own under his own ideological control to compete with SamA and Dario.
I'm technically waiting until my vision stabilizes after an operation to get contacts. So it's not quite that bad yet.
I've read that other people prefer dark themes, but for me that doesn't quite work. Something about the light letters glaring (as opposed to the background) just doesn't sit right.
Needless to say, the current era of sleek black/dark apps and dark themes being hip in dev tools is not fun. I do miss them though.
You have (limited) 100 Coke cans to sell (that you bought for say $1)
There are two large lines being formed for that. One line is offering an average $3 per bottle and another line is offering an average $2 per bottle.
Tell me which line they would throttle/starve even though they make a profit out of it.
Also, when the lines were formed you had no idea of the average price, but now you are getting a clear picture. Would you change your strategy / pricing or stick with your original "give the bottle to everyone for the same initial $1 price"
If I owned two lines both selling the same thing (preumably here Coke is a stand-in for compute), I would throttle the $2 dollar line. People without a choice might move to the $3 dollar line.
Unfortunately, back in the real world, Anthropic is dealing with two issues:
1. They're throttling all lines. Their latest model uses more tokens overall. Tokens are being rationed and context is being lowered.
2. There's another line for Pepsi right over there. And it costs $1.25 per can.
Anthropic should be lowering their price to compete with OpenAI, but they're not. They're making it even more expensive.
So tell me, does that really look like Anthropic is running a (as some people say) >50% profit margin?
for all you know, you think you are standing in the $3 line, but it really is $2 line and $3 line is BigCos, Govt and others who have guaranteed demand for several years.
Anthropic intruduces fake tool calls to prevent distillation of their models. Others still distill. Anthropic distils third party models. Claude now hallucinates tools.
Ok, so the answer is "they make the existing model worse to make it seem that the new model is good". I'm almost certain that this is not what's going on. It's hard to make the argument that the benefits outweigh the drawbacks of such approach. It doesn't give the more market share or revenue.
Tbf I don't think that it's just this one reason. While I'm not a subscriber to any LLM provider, the general feeling I get from reading comments online is that the models have a long history of getting worse over time. Of course, we don't know why, but presumably they're quantizing models or downgrading you to a weaker model transparently.
Now as for why, I imagine that it's just money. Anthropic presumably just got done training Mythos and Opus 4.7. that must have cost a lot of cash. They have a lot of subscribers and users, but not enough hardware.
What's a little further tweaking of the model when you've already had to dumb it down due to constraints.
How is a VSCode fork and a open weight LLM fine-tune worth $60B?
One would think Elon would learn his lesson after overpaying for Twitter and then having to merge his failures together to stay afloat. But no, more cash into the burning pile.
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