Powers Realign in AI-Assisted Coding: Google, Cognition carve up Windsurf after OpenAI’s failed $3B acquisition bid

A $3 billion bid by OpenAI to acquire Windsurf, maker of the AI-assisted integrated development environment of the same name, collapsed at the 11th hour, setting off a tumultuous few days of corporate maneuvering.

What’s new: Google licensed Windsurf’s technology for $2.4 billion and hired CEO Varun Mohan, co-founder Douglas Chen, and an unknown number of key engineers. Cognition AI, maker of the Devin agentic coding system, purchased what remained for an undisclosed sum. OpenAI was left empty-handed.

How it works: AI-assisted coding tools are boosting software engineering productivity, accelerating development cycles, and finding bugs and security vulnerabilities. As a leader in the field, Windsurf became a target for acquisition.

• In early May, Bloomberg reported that OpenAI had agreed to pay $3 billion for Windsurf, formerly known as Codeium. The deal would have given OpenAI talent, technology, and a user base to compete in AI-assisted coding.
• The same day, Windsurf CEO Mohan posted on the social media platform X, “Big announcement tomorrow!” But the day came and went with no further news.
• On July 11, Bloomberg reported that the deal was off. Instead, Mohan and the others had accepted positions at Google as part of a $2.4 billion non-exclusive deal to license Windsurf’s technology. OpenAI’s effort had unraveled partly because Microsoft, due to its relationship with OpenAI, would have gained access to Windsurf’s intellectual property.
• Three days later, Cognition announced that it had acquired Windsurf’s remaining assets. Windsurf promoted head of business Jeff Wang to CEO. The company awarded equity to all employees and accelerated the schedule for equity to vest.

Behind the news: Google’s hiring of Windsurf’s leadership and access to its technology in return for a large licensing fee mirrors its earlier arrangement with Character.AI. Such deals between AI leaders and startups have become increasingly common as AI companies seek quick advantages without the risk that regulators might delay or quash an outright acquisition, while AI startups seek infusions of cash to support the building of cutting-edge models. Other deals of this sort have involved Meta and Scale AI, Amazon and Adept, and Microsoft and Inflection.

Why it matters: AI-assisted coding is hot! Google recently launched Gemini Code Assist and Gemini CLI, competing with Amazon Kiro, Anthropic Claude Code, Microsoft’s GitHub Copilot, Replit Ghostwriter, and others. Expertise and technology from Windsurf may help it pull ahead. Meanwhile, Cognition’s 2024 release of Devin pioneered agentic coding, but since then competitors have taken the spotlight. Cash from Google gives the company a chance to regroup. As for OpenAI, there are other great makers of AI-assisted tools to negotiate with.

We’re thinking: Windsurf’s Anshul Ramachandran teaches a short course on agentic coding. Check it out for a peek at the technology Google deemed worth $2.4 billion.