Good morning. Andrew here. SpaceX’s potential acquisition of the coding start-up Cursor is raising a lot of eyebrows this morning. Skeptics see it as a way for Elon Musk to shore up xAI, which SpaceX bought recently and which Musk has said needs to be rebuilt from the ground up. Some SpaceX investors grumbled about how the xAI deal diluted their stock holdings. But most will probably keep quiet if the Cursor deal happens, because they are still likely to make huge profits if SpaceX goes public this year at the $2 trillion valuation it’s hoping for. (Was this newsletter forwarded to you? Sign up here.)
SpaceX’s risky coding betThree months ago, the promise of a SpaceX I.P.O. for investors was being able to buy a piece of Elon Musk’s industry-leading rocket and satellite internet business. That proposition was tested in February when the company bought xAI, Musk’s money-losing artificial intelligence lab. It’s happening again as SpaceX considers spending $60 billion for Cursor, a coding start-up — another sign of Musk shifting his focus to A.I. What’s happening: SpaceX wrote on social media that it had started working with Cursor to “create the world’s best coding and knowledge work AI.” In other words, Cursor, which has said it lacks computing resources, will get access to SpaceX’s technological firepower. More important, Cursor also gave SpaceX the right to buy it for $60 billion this year. If there’s no takeover, SpaceX said it would pay the start-up $10 billion — a potentially record-setting breakup fee. The benefits for Cursor are obvious. It began 2025 as a clear leader in A.I.-assisted coding, raising $3.4 billion in funding. (Its valuation last year jumped 11-fold in 11 months, to $29 billion in November.) But in recent months, Anthropic’s A.I. assistant, Claude, has rapidly seized market share in coding with new agent capabilities, and OpenAI is spending heavily to promote its Codex tool. Cursor increasingly risks falling behind, even as it’s in talks to raise another round of funding at a valuation above $50 billion. It’s a more mixed picture for SpaceX, however:
Musk claims that A.I. and space exploration go hand in hand, having talked up things like A.I. data centers in space. That said, xAI can better compete against the deeper-pocketed OpenAI and Anthropic by being attached to a publicly traded SpaceX, which could more easily tap equity and debt-financing markets. The question is whether further building out the cash-intensive xAI, which pushed the combined company to a nearly $5 billion loss last year, will make potential investors think twice about what increasingly feels like an xAI I.P.O. as much as it does a SpaceX one.
Markets whipsaw amid uncertainty about the war in the Middle East. U.S. stock futures are up today — but so, too, is Brent crude, the international oil benchmark — as peace talks between the U.S. and Iran were postponed. President Trump indefinitely extended a cease-fire, but the Iranian navy claimed to have seized two vessels near the Strait of Hormuz. Lufthansa said it would cut 20,000 short-haul flights through October because of the war, and United Airlines slashed its full-year earnings guidance amid a jump in fuel costs. The Gates Foundation is reportedly planning big layoffs and an inquiry into its ties to Jeffrey Epstein. The philanthropy giant will cut up to 500 positions, or roughly 20 percent of its staff, according to The Wall Street Journal, and has opened an external review of its engagements with Epstein. The scandal could linger over the foundation as Bill Gates is set to testify before Congress in June about his relationship with the convicted sex offender. A Virginia ballot victory has bolstered Democrats’ chances of retaking the House. Voters approved an aggressively gerrymandered electoral map for the state that could turn two to four congressional seats blue in time for the November midterm elections. Yesterday’s results essentially nullified Republicans’ efforts to protect their House majority through redistricting in states like Texas.
Robinhood’s venture fund buys into OpenAIOpenAI and Robinhood got into a scrap last summer, when the digital brokerage said it was offering investors access to the artificial intelligence giant’s privately traded shares. They appear to have reconciled. Today, Robinhood Ventures Fund I, the firm’s recently introduced publicly traded fund that invests in prominent private start-ups, is investing $75 million in OpenAI, its biggest deal yet, Niko Gallogly is first to report. The context: Last July, Robinhood offered $1.5 million worth of tokens that it said were linked to OpenAI and SpaceX. The tokens were part of the brokerage’s effort to provide retail investors greater access to private companies. That irked OpenAI. “We did not partner with Robinhood, were not involved in this, and do not endorse it,” OpenAI wrote on X, adding, “Please be careful.” Robinhood sees a lot of retail demand for stakes in start-ups. As companies stay private longer, new investment vehicles are providing retail investors a pathway in. “The amount of growth and wealth creation that’s happened in the private markets, it has just really increased dramatically,” Sarah Pinto, the president of Robinhood Ventures Fund I, told DealBook. OpenAI has been courting the retail crowd. Last month, as part of its record-breaking $122 billion fund-raising round, OpenAI collected more than $3 billion from individual investors. The firm also partnered with ARK Invest to give public investors access to OpenAI’s shares through three of ARK’s exchange-traded funds. Adding Robinhood as an investor offers companies considering an I.P.O., including OpenAI, “a way to start building a relationship with their future shareholders,” Pinto said. Broadening access to private markets can be positive for retail investors, Haim Israel, a global strategist at Bank of America, recently told DealBook. “A lot of the innovation is actually being focused in the private market, and not the public market, and investors in the retail market are missing out.” But the risks are real. “You don’t have ground rules to protect them,” Israel said. “There always has to be a balance.”
On sock puppets and a potential Fed compromisePolitical independence. The economic impact of artificial intelligence. A headquarters renovation project that could gum up succession at the Fed. Yesterday’s Senate confirmation hearing for Kevin Warsh, President Trump’s nominee to run the Fed, covered plenty of ground. But it failed to give investors clarity about when the central bank might lower interest rates, or who will lead it after Jay Powell’s term as chair ends next month. The futures market this morning sees rates on hold until September 2027, as concerns about the inflationary impact of a prolonged war in the Middle East grow. That view is sharply at odds with Trump’s. The president told CNBC before the hearing that he would be disappointed if a Warsh-led Fed didn’t lower borrowing costs right away. The “sock puppet” moment: In an effort to dispel concerns about his independence, Warsh testified that the president had “never asked me to predetermine, commit, fix, decide on any interest rate decision in any of our discussions, nor would I ever agree to do so.” Warsh didn’t call for rate cuts yesterday, but he left the door open, saying that A.I. productivity gains and a smaller Fed balance sheet could justify such moves. And he largely ducked taking a position on the Justice Department’s criminal investigation into Powell’s handling of the renovation project or on Trump’s effort to fire Lisa Cook, a Fed governor. But in response to a question from Senator John Kennedy, Republican of Louisiana, Warsh asserted that he was nobody’s “human sock puppet.” A big obstacle for Warsh’s confirmation remains. Senator Thom Tillis, a Republican from North Carolina and a central member of the Senate Banking Committee, reiterated yesterday that he would block confirmation of any Fed nominee until the Justice Department’s investigation ends. But Tillis supports a potential Plan B for the Fed. Some Senate Republicans have floated the creation of a special congressional committee to examine construction projects under the banking committee’s purview, including the Fed’s presumably. Tillis suggested he’d stop blocking the Fed nominee process under such a plan, adding, “I not only think it’s a good offramp, but I also think it’s good governance.” Treasury Secretary Scott Bessent reportedly floated a similar idea. There’s one holdup: It’s not clear whether the president would be on board. “We deeply regret that this has occurred.”— Andrew Dietderich, a partner at the white-shoe law firm Sullivan & Cromwell, apologizing to a federal bankruptcy judge after his team submitted a court filing that contained artificial intelligence “hallucinations.” Substack grows abroadSubstack is making progress on its push into international markets, and has doubled its number of creators who charge for subscriptions in the last year, Jessica Testa of The Times is first to report for DealBook. When Substack announced it had raised $100 million last summer, its founders said they would be “doubling down” on its app, where newsletter publishers can share videos, podcast episodes and short-form posts called Notes. It was a moment of acute ambition for the company, which then had five million paid subscriptions. “I don’t see anything in the laws of physics that would prevent 100 million or more paid subscriptions being on Substack one day,” Chris Best, the platform’s C.E.O., said at the time. The founders also teased global expansion. Of the nearly 100,000 publishers who earn money from subscriptions — up from about 50,000 in December 2024 — nearly 30 percent are based outside the United States. European publishers collectively earn more than $90 million annually on Substack, a company spokeswoman told DealBook. Accordingly, Substack is “nearing completion” on assembling a flock of new leaders to oversee operations in France, Germany, Italy, Spain, Denmark, Norway, the Netherlands, Sweden, Switzerland and Austria. It is also hiring, or has already made hires, in Australia, Brazil, Japan and Canada. Top-earning newsletters abroad include those written by Selvaggia Lucarelli in Italy, Zoë Yasemin and Jonas Kooyman in the Netherlands, and Jessica Troisfontaine and Lauren Bastide in France. These markets have been particularly fruitful for fashion, food and lifestyle newsletters, according to Farrah Storr, the head of international at Substack. (The top category in the U.S. remains news and politics.) But traditional media organizations, including Der Spiegel and The Guardian, have also more readily embraced the platform in Europe and the U.K. In the U.S., the largest media outlets on Substack are New York magazine and The New Yorker. Auto-translation of writing into 15 languages is also coming, first to Notes, starting on Wednesday. “It’s clear that Substack is, much like in the U.S., creating a space and home for writers,” including “those who dream of independence,” said Storr, who previously edited the British editions of Elle and Cosmopolitan magazines. 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