Chat terminal unresponsive and requires multiple attemps by the AI to achieve results

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:lady_beetle: Bug Description:
When asking Cursor AI to execute commands in the Chat terminal (like running tests or installing packages), the process is extremely slow or unresponsive. Most of the time, the AI doesn’t visibly enter the command, doesn’t output anything, or gets stuck in a broken state.
In some cases, like the attached image, the AI attempts to leave the terminal session midway, resulting in no feedback or result. This makes it unclear whether the task was actually performed.

:counterclockwise_arrows_button: Steps to Reproduce:

  1. Open a Cursor AI project with both frontend and backend folders.
  2. Ask the AI to install a package (e.g., npm install axios --save) in the backend directory using a Chat command.
  3. Observe that the AI either:
  • Doesn’t visibly enter the command
  • Fails to show any output
  • Attempts to exit midway, leaving only unreadable characters (see screenshot)

:camera: Screenshot:

:laptop: Environment:

  • OS: Windows 11 Home
  • Cursor Version: 0.49.4

:prohibited: Impact on Usage:
Yes, this significantly interrupts usage. I often have to skip automated steps and manually run commands in the main terminal. To make AI context-aware again, I have to manually re-add the terminal context, which slows down workflow and breaks automation potential.

The issue is percisting now with normal commands. The agent is trying to run in Chat commends and it sticks there forever. I need to click the Shift Skip option to continue