Good day.When SpaceX announced it had secured an option to buy Cursor for $60 billion, some read the news as showing that even very popular AI apps are going to have trouble remaining standalone entities.

Another take on it, however, might be that the market is clamoring for competitive options. One reason Cursor has grown so popular among developers is it allows its customers to pick underlying large language models. And customers are hoping that freedom of choice will continue.

“What we thought was really good from Cursor is we are not locked into an ecosystem,” said Pierre Martin, chief technology officer at Gavel, a legal AI startup. “If I buy Codex, I have to use OpenAI models. If I buy Claude Code, I have to use Anthropic. Cursor gave us the flexibility to pick the right model for the right task.” (Martin is an individual limited partner in venture firm Neo, an investor in Cursor.)

In announcing the deal, SpaceX, which includes AI model developer xAI, said it will be combining efforts with Cursor in order to develop models. Customers like Martin hope that will result in better models–without limiting choice.

“I would surely hope that the tool keeps its developer-friendliness and part of that is to be able to pick and choose the models that make the most sense,” Martin said.

Indeed, locking customers into models could actually undermine Cursor’s value to SpaceX, Franco Granda, a senior research analyst at PitchBook, wrote in a note.

“Cursor’s strongest moat today is model agnosticism: Users can plug in whichever AI model performs best for their workflows. An acquisition by SpaceX/xAI would presumably end that agnosticism, pushing Cursor toward Grok-native integration. That risks alienating the very user base that makes the product valuable,” he wrote.

But one shouldn’t assume that a lock-in is inevitable in this case. There’s a lot of so-called co-opetition in the AI market right now, where rivals collaborate due to market demand. Google, for instance, just agreed to invest $40 billion more in Anthropic, even though the two are rivals in large language models.

And now on to the news...

Musk testifies. Elon Musk took the stand Tuesday in a landmark trial that pits the billionaire against OpenAI, which he helped found, in a case set to shape the future of artificial intelligence.

• “I think they’re gonna try to make this lawsuit very complicated, but it’s actually very simple,” Musk said as soon as he took the stand, staring directly at the jurors. “It’s not O.K. to steal a charity.” He invoked a cause greater than himself, stating that if he were to lose this case, the country could risk “losing every charity in America.”
   
• Judge Yvonne Gonzalez Rogers, who is presiding over the trial in an Oakland federal courthouse, broke in after an objection to tell jurors that Musk’s perspective was his opinion and had “no legal value whatsoever.”

A trio of executives who worked at Alphabet’s Google and Meta has developed a new server designed to solve the problem of how to run artificial intelligence models that are increasingly large and complex. Majestic Labs AI, founded by Ofer Shacham, Masumi Reynders and Sha Rabii, announced in November that it had raised $100 million from backers including Bow Wave Capital, Lux Capital, Grove and others. The three worked at Google designing and selling early generations of its data center and mobile device chips, then later building the custom silicon team at Meta Reality Labs.

Parallel Web Systems, a startup founded by Parag Agrawal, the former chief executive of Twitter, has raised $100 million in Series B funding—reflecting increased interest in deploying autonomous artificial-intelligence agents. The round was led by Sequoia Capital, and boosts the Palo Alto, Calif., startup’s valuation to $2 billion. Existing investors including Kleiner Perkins, Index Ventures and Khosla Ventures also participated.

Funds

QDNL Participations changed its name to Ground State Ventures and closed an $88 million fund well above the original $70 million target. The firm invests in quantum technology startups and has offices in Amsterdam, London and San Francisco.

Nomi Capital, which invests in U.S. defense and national security technology, closed its Nomi Defense Fund I, targeting over $50 million in total platform deployments.

People

Eclipse hired Amir Frenkel as the firm’s first chief AI officer. He most recently served as vice president of GenAI at Meta.

Moderne, a startup providing infrastructure for AI coding agents operating across enterprise software systems, appointed Matt “Fink” Finkelstein as chief partnerships officer. He joins the company from GitHub.

Financial planning platform Conquest Planning appointed Rob Crnkovic as chief revenue officer, Kristen Winther as chief operating officer and Karen Budell as chief marketing officer.

Manifest OS, a New York-based legaltech startup, landed $60 million in Series A funding at a $750 million valuation from investors including Menlo Ventures, Kleiner Perkins, First Round Capital and Quiet Capital. 

OpenLight, a Santa Clara, Calif.-based photonic application-specific integrated circuit chip design startup, added $50 million in Series A-1 funding led by Matter Venture Partners.

Actively, a New York-based revenue platform using AI agents, scored $45 million in Series B funding at a $250 million valuation. TCV and First Harmonic led the round, which included participation from Bain Capital Ventures, First Round Capital and Alkeon Capital Management.

Golden Child, a Miami-based fresh dog-food startup, emerged from stealth with $37 million in funding from investors including Atomic, A* and Redpoint Ventures.

Windmill, a New York-based AI-powered performance review platform, picked up a $12 million investment. Inspired Capital led the funding, which included contributions from Primary Venture Partners, Founder Collective and Oceans Ventures.

Clarasight, a New York-based AI platform for enterprise travel and expense, grabbed $11.5 million in Series A funding led by AlleyCorp.

Segura, a Brazilian startup building AI infrastructure for insurance distribution, was seeded with an $8 million investment co-led by Andreessen Horowitz and Kaszek.

Redpine, a Stockholm-based startup giving AI agents access to premium non-public data, raised €6.8 million (about $8 million) in seed funding. NordicNinja led the investment, which saw participation from Luminar Ventures and Node Ventures. Marek Kiisa, general partner at NordicNinja, will join the company’s board.

Dex, a London-headquartered AI-powered recruiter focusing on software engineering talent, was seeded with a $5.3 million investment led by Notion Capital.

• AI Worries Have Returned to Wall Street. Now Come Earnings.
   
• Google Clears Pentagon to Use AI Tools in Classified Settings
   
• Robinhood Profit Rises on Boost From Prediction Markets, Gold Subscriptions
   
• Crypto Venture Linked to Men Sanctioned in Scam-Ring Probe Partnered With Trump Firm

• The race is on to keep AI agents from running wild with your credit cards (Wired)
   
• AI optimism surges in Asia, unlike in the U.S. (Rest of World)

This newsletter was compiled by Yuliya Chernova and Zachary Cole.

Share your tips, comments and questions: vcnews@wsj.com

The team: Matthew Strozier, Yuliya Chernova, and Brian Gormley.

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