OpenAI to acquire AI coding tool Windsurf for $3 billion

While the deal has not yet been finalized, the acquisition signals OpenAI’s intent to strengthen its position in the increasingly competitive market for AI-driven coding assistants. These systems are capable of generating code based on natural language prompts, streamlining the software development process.

Windsurf, formerly operating under the name Exafunction, had recently been in talks with prominent investors such as Kleiner Perkins and General Catalyst to secure funding at a $3 billion valuation. The company’s valuation had already reached $1.25 billion in a funding round led by General Catalyst the previous year, indicating rapid growth and investor confidence in its technology.

OpenAI faces growing competition in this sector from rivals like Anthropic and Microsoft-owned GitHub, both of which offer their own AI-powered tools for programmers. Additionally, a wave of new startups, including Anysphere, the company behind the coding tool Cursor, have attracted significant investor funding, further intensifying the competitive landscape.

This potential acquisition follows OpenAI’s recent completion of a substantial $40 billion financing round led by SoftBank Group, which valued the company at an impressive $300 billion.

In related news, OpenAI announced on Monday a partial reversal of its plans to restructure as a more conventional for-profit entity, following public criticism. The company stated its intention to proceed with restructuring its for-profit arm as a public benefit corporation while maintaining the overall business under the control of its nonprofit structure. This decision represents a significant shift in its previously outlined plans and effectively preserves its current organizational framework.

The decision to maintain the nonprofit’s control came after facing pressure from various stakeholders, including former employees, academics, and competitors such as Elon Musk, a co-founder of OpenAI who later departed to establish his own AI company.

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However, Musk’s legal counsel dismissed OpenAI’s revised restructuring plan as a “transparent dodge” that fails to address the core concerns regarding the transfer of charitable assets for the benefit of private individuals and entities, including CEO Sam Altman, investors, and Microsoft. Musk had previously sought a court order to block OpenAI’s move towards a for-profit structure, a request that was denied, although parts of his lawsuit have been allowed to proceed. Musk also made an unsolicited $97.4 billion bid to acquire the assets of the nonprofit controlling OpenAI, which was unsuccessful. OpenAI has previously stated that Musk’s legal actions are an attempt to impede a competitor.

In a statement released on Monday, Musk’s lead counsel argued that OpenAI’s revised plan appears designed to evade legal scrutiny while still contradicting the company’s founding mission of developing AI for the benefit of all humanity. He asserted that “the founding mission remains betrayed.”

The potential acquisition of Windsurf underscores OpenAI’s strategic moves to consolidate its position in the rapidly evolving AI landscape, particularly within the specialized domain of AI-assisted coding.