SpaceX Makes a $60 Billion Bet on Its AI Future

0:00The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM.

0:33The U.S. will allow Iran to immediately start selling oil as part of the deal to end the war. Plus, why SpaceX is spending$60 billion on the AI coding agent cursor. SpaceX thought it was a rocket company, thought it was a satellite company. And it's going to keep doing both of those things, but its new future is in AI. And is Qualcomm actually a bargain among AI chip makers? It's Tuesday, June 16th. I'm Alex Osolov for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

1:16The Trump administration says the agreement to end the war between the U.S. and Iran was signed electronically on Sunday. No text has been released. Though, speaking today from the G7 meeting in France, President Trump said that could soon change. But I will actually, I'll not only release it, I'll probably have a press conference and read it to you word by word so that the press covers it accurately. Because it's a very important document. Some of what the document contains has already begun trickling out. The journal is exclusively reporting that the U.S. would allow Iran to immediately begin selling oil and fuel.

1:53A senior U.S. official says that sustained sanctions relief would depend on how Iran complies with core U.S. demands, like opening the Strait of Hormuz and the dismantling of Iran's nuclear program. Tehran would also still not get immediate access to billions of dollars in frozen funds. WSJ national security correspondent Alex Ward is reporting from Geneva and says this will be a financial benefit to Iran, a sensitive topic for the Trump administration. It feels like it's basically a payment to Iran to get them to sign the deal, right? You'll hear the Trump administration say, well, there are billions of dollars in frozen assets that the U.S.

2:26is not going to unfreeze to Iran. But in effect, by letting them sell oil, Iran will be getting revenue. Alex says some of Trump's supporters are skeptical of the deal. There are a lot of MAGA folks who are supportive of the president but did want to see regime change in Iran or did want to see Iran pay a heavier price for ending the war. What we have right now is an interim agreement to continue nuclear talks. And if the U.S. were to get massive concessions from the Iranians on the nuclear front, then OK, then you could make the case that this down payment was worth it. You'll have the critics say, well, Iran's already getting money up front from these oil sales.

3:03What incentive do they really have to engage in pretty strict restrictions of its nuclear work? SpaceX said today that it would buy the parent company of AI coding agent Cursor for$60 billion in stock. Cursor is a favorite tool of Silicon Valley, and it already brings in billions of dollars in annual revenue. The deal comes just a few days after SpaceX's historic IPO, and on the same day that SpaceX surpassed Amazon in market cap. At$2.66 trillion, it's now the fifth largest publicly traded company. For more, I'm joined now by journal reporter Becky Peterson. Becky, what does SpaceX want to do with Cursor?

3:44Well, Cursor is a really successful app for coding. It's competitive with Cloud Code and with OpenAI's codecs. It's going to give SpaceX the opportunity to reach these enterprise customers who want to use AI to redo how software is built at their companies. One of the things I remember from the lead up to SpaceX's IPO is that many of these big projections for SpaceX's future really built around its AI business. So how critical is this acquisition to SpaceX's business? Yeah, that's really the thing to understand about this. SpaceX thought it was a rocket company, thought it was a satellite company, and it's going to keep doing both of those things.

4:26But its new future is in AI. The acquisition of XAI in February created this whole new future product lineup and this whole new vision for the company and really helps justify its big price on the stock market. Well, speaking of prices, I mean, Cursor, yes, was known as a Silicon Valley darling. It kicked off this vibe coding trend. But can you tell us a little bit about what it does and why it's worth$60 billion? dollars. Software development has been a very lucrative career for all these people in Silicon Valley for decades. And AI is about to replace it. So Cursor is part of that. And a lot of that valuation, it's aspirational.

5:08It's SpaceX wanting to make sure they get the best products that they can. And in this moment in Silicon Valley, that means paying an absolute premium. They do have good financial models, subscription revenue, it's recurring revenue, so it's really reliable. It looks good on a financial balance sheet. Today, SpaceX's stock rose almost 5 percent, and it's now about 50 percent higher than its IPO price. What is driving this investor enthusiasm? Hopes and dreams and excitement about the future that Elon Musk is promising. And some of that is Mars, some of that is AI data centers. But the total addressable market that SpaceX outlined in its IPO prospectus is mostly AI applications.

5:54And that's where Cursor fits in. That was WSJ reporter Becky Peterson. Thanks, Becky. Thank you. In other deals news, growth in the U.S. pizza industry has stalled. And Yum! Brands said today that it will sell its Pizza Hut chain to two separate buyers. It's selling the operations outside mainland China to private equity firm Long Range Capital for about$1.5 billion. And Yum China Holdings will buy the China business for about$1.2 billion. The deal allows Yum to focus on its better-performing brands, such as Taco Bell and KFC. And the journal has learned that General Motors is in talks with Lockheed Martin about making parts for its weapons.

6:33They're still talking about which parts GM would make. GM and Lockheed executives announced their agreement to work together to increase munitions production at a conference today in Detroit. The vice president of strategy for the GM defense unit, Bruce Brown, explained how the company would approach this. It's the same model that's making us successful right now for our infantry squad vehicles when we think about GM defense. It's that commercial off-the-shelf model here we pull directly from our Chevy Colorado. So it's an opportunity here for us to expand on those key core competencies that we already have and apply them across the wide range here and hopefully into Lockheed Martin and help enable this defense industrial base here and delivering that equipment at speed and at scale.

7:15GM CEO Mary Barra has met with Trump administration officials to discuss a larger military role for the automaker. The administration says that production needs to be beefed up to replenish stockpiles of missiles and other critical weapons that have fallen because of the wars in Ukraine and Iran. But there are doubts that American weapons makers are able to meet increased demand. President Trump has invoked a law from the Cold War era, the Defense Production Act, to increase weapons production. He wrote a memo this month to Defense Secretary Pete Hegseth saying he should pursue deals with private companies to, quote, provide for the national defense.

7:50Coming up, Marriott is raking it in from its credit cards, and its hotel owners want a piece. More on that after the break.

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8:32In the latest on job cuts, EV startup Rivian laid off about 2 % of its workforce today. The hundreds of employees included people handling sales and marketing. It's meant to help make the company profitable as it launches a key new model, the R2 SUV. And brokerage firm Robinhood said it will lay off 10 % of its workforce, or about 290 jobs. CEO Vlad Tenev told employees today that the cuts were an effort to keep the company lean, even as its business has never been stronger. In other corporate news, we're exclusively reporting that more than 50 of America's biggest hotel owners are pressuring Marriott to share more of the wealth from its Marriott Bonvoy loyalty program.

9:12The franchisees say it's costing them too much to provide rooms when customers cash in their credit card points at their Marriott hotels. Marriott has said that fee revenue from its co-branded credit cards is expected to jump 35 % this year to nearly$1 billion. Marriott risks taking a hit to its stock price if it significantly reduces its fee revenue. Its shares today slipped by less than 1%. Yesterday's market rally didn't carry over to today, and major U.S. indexes ended the day mixed. The Dow rose 0.6%, while the S &P dropped 0.6%, and the Nasdaq fell 1.2%. The bull market that has lifted many tech stocks seems to have left Qualcomm behind.

9:53Most people on Wall Street know it as a smartphone chip company. Not a great place to be, as smartphone sales are expected to decline this year. In its most recent quarter, more than half of Qualcomm's revenue came from sales of smartphone chips, and its stock has returned an anemic 5 % over the past two years. An index that tracks chip stocks, meanwhile, is up more than 150 % during that same period. However, WSJ Heard on the Street writer Asa Fitch says that lately, it's looking more like Qualcomm could become a force in the data center chip business. In April, when they announced their earnings, they said that they had a major customer for their data center chips.

10:29They have some ingredients that could really work well in the data center if they're all put together. Will it be successful? It's really hard to say because NVIDIA, of course, is the elephant in the room and it's really hard to displace that elephant. But they're trying and they have a reasonable chance of success, especially if this whole AI boom thing continues to go the way it's been going and demand doesn't fall off. They have an investor meeting next week where they're going to try to put some more detail around what they're actually going to do to capture part of this market. So that's going to be a big fork in the road for them.

10:59And that's what's news for this Tuesday afternoon. Today's show is produced by Anthony Bansi and Danny Lewis with supervising producer Tali Arbel. I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

11:22Hey, this is Telus Demos. And I'm Miriam Gottfried. We're reporters at The Wall Street Journal and the hosts of WSJ's Take on the Week. It's a weekly show that gives listeners a leg up in the world of markets and investing. From the Fed's moves to market bubbles, we dive into the biggest deals, key players, and business news ahead. If you're looking for more news and tools that you can use to help navigate the markets, consider becoming a subscriber to The Wall Street Journal. Visit subscribe.wsj.com slash takeontheweek to subscribe now. Thank you.