Cognition has officially announced its intention to acquire Windsurf, just a short time after OpenAI's reported $3 billion attempt to buy the AI coding startup collapsed. Around the same time, Windsurf’s CEO was also lured away by Google.

Back in May, it was widely rumored that OpenAI was close to finalizing a deal for Windsurf, previously known as Codeium. Windsurf provides tools like Autocomplete — which offers code suggestions while developers type — and Search, which helps locate specific code snippets within a repository using natural language queries.

However, last week saw the collapse of what had long been speculated as an impending acquisition, with some reports pointing to ongoing friction between OpenAI and Microsoft as one of the reasons behind the breakdown. In response, Google moved quickly to secure a licensing agreement and bring on board several key employees from Windsurf.

Shortly thereafter, Cognition and Windsurf jointly revealed that Cognition would now be acquiring the popular AI development platform. While exact financial terms weren't disclosed immediately, Cognition’s CEO Scott Wu stated in a blog post that the acquisition encompasses Windsurf’s intellectual property, products, trademarks, business assets, and talent.

Jeff Wang, Windsurf’s newly appointed interim CEO, described the situation as “a very unstable period,” but emphasized that much of what makes the company special remains intact.

Inside the Cognition Acquisition

Cognition is best recognized for developing Devin, which it branded as the first fully autonomous software engineer. However, when the service launched earlier this year at $500 per month, many critics highlighted its shortcomings.

Wang expressed confidence that combining Cognition’s AI agents with Windsurf’s AI-powered integrated development environment (IDE) would create a powerful synergy. He explained that this integration could empower everything from independent coders to major corporations by enabling more automated code generation.

He envisioned teams planning tasks in Windsurf using Devin’s deep understanding of codebases, delegating work to multiple Devins, and then handling the most complex parts themselves using features like Tab and Cascade.

"All of this will flow together seamlessly within the same workspace," Wang said. "That’s the future we’re building."

He added that the combination of agent-based AI and IDEs, along with other upcoming innovations, would result in a formidable toolkit.

Scott Wu from Cognition confirmed that Windsurf would continue operating as usual, while Cognition focuses on enhancing Devin. Over the next few months, he said, the company will heavily invest in incorporating Windsurf’s technology and unique IP into Cognition’s offerings.

Google Enters the Fray

Prior to the announcement of the Cognition deal, Google confirmed it paid $2.4 billion for access rights and recruited a select group of Windsurf employees, including part of the R&D team, CEO Varun Mohan, and co-founder Douglas Chen. Jeff Wang, formerly head of business, stepped up to lead as interim CEO.

"Bringing top AI coding experts from Windsurf into Google DeepMind will help us accelerate our research in agentic coding," Google said in a public statement released to media outlets.

In a separate blog post, Windsurf acknowledged that their tools were well-suited to complement other platforms. It admitted, however, that there are now numerous external solutions available for software development.

The company noted it intends to refocus efforts on enterprise-level problems — its original mission — and pledged to adapt innovations from across the industry to better serve enterprise needs.

It described the Google deal as a catalyst for this new chapter.

OpenAI Faces Headwinds

The failed OpenAI-Windsurf deal reportedly stemmed in part from growing tensions between OpenAI and its largest investor, Microsoft. These strains have simmered beneath the surface for months.

Microsoft initially invested $1 billion in OpenAI back in 2019, and that figure has since grown to $13 billion. Yet recent developments suggest the once-harmonious relationship has cooled.

Earlier this year, Microsoft began incorporating a broader array of AI models into 365 Copilot, moving beyond exclusive reliance on OpenAI systems. Meanwhile, OpenAI started exploring partnerships outside of Microsoft’s infrastructure.

Reports last month indicated that relations were deteriorating further, with the Wall Street Journal stating that “tensions are nearing a breaking point.”

Sources claim OpenAI executives considered accusing Microsoft of anti-competitive practices, while Microsoft allegedly thought about pausing discussions.

Central to the conflict appears to be OpenAI’s push to move away from its original non-profit structure, concerns over Microsoft’s control of compute resources, and uncertainty around Microsoft’s potential access to Windsurf’s IP if the deal had proceeded.

Another sticking point involves a contractual clause outlining what happens should OpenAI achieve artificial general intelligence (AGI). If that milestone is reached, Microsoft’s access to OpenAI’s models would be automatically terminated — raising questions over how AGI would be defined, with Microsoft reportedly worried that OpenAI might cut off access prematurely, according to a Wired report.

Meanwhile, Satya Nadella, Microsoft’s CEO, has publicly dismissed the idea of AGI as a “nonsensical benchmark hack,” while OpenAI’s Sam Altman continues to push aggressively toward achieving it, even going so far as to predict its arrival this year.

Parallel to all this, the battle for elite AI talent in Silicon Valley intensifies, with Meta aggressively hiring OpenAI staff by offering compensation packages worth hundreds of millions of dollars.

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