Elon Musk’s artificial intelligence company xAI plans to reach a new partnership with programming startup Cursor to let the latter tap its vast computing power, according to people familiar with the matter. Cursor plans to train its latest AI programming model, Composer 2.5, on xAI’s infrastructure, sources said. They also said Cursor will use xAI’s tens of thousands of fast graphics processing units (GPUs).

This model effectively transforms xAI into a cloud service provider. By leasing some of its GPUs to other companies, xAI can start generating revenue from its vast infrastructure while continuing to develop its own AI models. The arrangement helps the company offset the costs of building and operating a data center while also deepening ties with a startup that holds valuable code data.

The three major cloud service providers, Amazon, Microsoft and Google, own millions of chips and rent out computing power to thousands of companies and developers, making huge profits from it. Startups like CoreWeave and Lambda have built their businesses around providing GPUs to developers of AI models. Access to computing power has become an increasingly competitive part of the artificial intelligence arms race.

This is not the first collaboration between Cursor and xAI. xAI hired two former Cursor product engineering leads, Andrew Milich and Jason Ginsburg, in March of this year. According to previous reports, Ginsburg and Milich are responsible for xAI’s product team and report directly to Musk and xAI President Michael Nicolls.

xAI is one of many companies competing to build the best AI model, and its data center size is also at the forefront. In December, Musk said at an all-employee meeting that xAI would beat competitors such as OpenAI and Anthropic because it has more computing power to train models.

In the past two years, xAI has rapidly expanded its data center and named it "Colossus". Last year, the company said it had about 200,000 Nvidia GPUs, and Musk has said it plans to expand to 1 million GPUs.

Reports emerged last month that Cursor was in talks to raise capital at a valuation of about $50 billion. At the same time, Cursor is also facing pressure as large artificial intelligence startups such as Anthropic and OpenAI actively enter the field of code assistants.

In March of this year, Cursor released Composer 2, a code model designed to generate and edit code for large projects.