OpenAI’s $3 billion bid to buy artificial intelligence (AI) coding startup Windsurf crumbled late Friday, and rival Alphabet Inc.’s Google quickly picked up the pieces: The search engine giant said it has struck a deal to acquire top Windsurf executives and licensing rights to some Windsurf technology.
Google announced the hiring of Windsurf CEO Varun Mohan and company co-founder Douglas Chen, along with staffers, to work at its DeepMind AI unit on agentic coding, based on multiple reports Friday.
Google declined to provide financial terms of the deal. But it disclosed it is not taking a stake in Windsurf and will not have any control over the company. As part of the deal, Google gets a nonexclusive license to certain Windsurf technology, though the startup remains free to license its technology to others.
“We’re excited to welcome some top AI coding talent from Windsurf’s team to Google DeepMind to advance our work in agentic coding,” a Google spokesperson said. “We’re excited to continue bringing the benefits of Gemini to software developers everywhere.”
In a separate statement, Mohan and Chen said, “We are proud of what Windsurf has built over the last four years and are excited to see it move forward with their world-class team and kick-start the next phase.”
Mohan will reportedly focus on agentic coding initiatives at DeepMind, primarily on the Gemini project.
Jeff Wang, Windsurf’s head of business, will take over as the company’s interim CEO, he announced in a post on social media. Most of Windsurf’s 250-person workforce remains at the company.
OpenAI was not immediately available for comment.
The shocking twist, first reported by The Verge, comes as tech giants such as Alphabet, Meta Platforms Inc., and Microsoft Corp. relentlessly pursue high-profile acquisitions and offer multi-million-dollar pay packages to attract top talent in the race to lead the next wave of AI.
OpenAI’s potential purchase of Windsurf was a source of heightened tensions between the maker of ChatGPT and Microsoft, whose Copilot competes with Windsurf, according to a Business Insider report. Microsoft has invested more than $13 billion in OpenAI.
“All the big AI guys want to get more into AI coding, especially as agentic coding heats up. I suspect that the execs at Windsurf were disappointed with OpenAI walking away, so this may be a reaction to that,” Jack Gold, founder of J. Gold Associates, said in an email. “Clearly this is a continuation of the AI expertise wars going on in the industry, not only with Google and Meta acquiring key talent, but also Microsoft and AWS.”
Added Brad Shimmin, vice president, practice lead data and analytics, at The Futurum Group: “There’s a lot of market FUD (fear, uncertainty, doubt) enveloping OpenAI right now, stemming from its strained relationship with Microsoft, questions over the company’s long-term financial viability, and several recent stumbles, such as a legal issue that forced the company to go silent over its recent partnership with Apple designer Jony Ives. OpenAI has been comparatively slow to Windsurf to capture the burgeoning market for AI-assisted and agentic code development tooling, compared with frontier model maker rivals Anthropic and Google. Its efforts there also placed it at odds with Microsoft, which enjoys a very dominant position within the software development market, built on top of VS Code and GitHub. With those frictions and headwinds at play, it’s easy to see how this deal might run aground.”
