Google scuttled OpenAI’s negotiations to purchase AI coding firm Windsurf (formerly Codeium), by agreeing to pay roughly $2.4 billion to license the startup’s core technology, hire co-founder and CEO Varun Mohan and bring a passel of employees with him to Alphabet. The license is non-exclusive and Google is not taking a stake in Windsurf. Days after the Google deal, AI startup Cognition announced it would be acquiring Windsurf (both startups are backed by Peter Thiel’s Founders Fund). Mohan, co-founder Douglas Chen and some members of the Windsurf R&D team are moving to Google to work primarily with DeepMind on agentic coding. The $2.4 billion covers licensing fees and compensation.

While Cognition has not disclosed the value of its acquisition, “co-founder and CEO Scott Wu said that the company will be purchasing Windsurf’s talent, products, intellectual property and its clientele of more than 350 enterprises,” reports Silicon Republic.

The Google move comes after expiration of an exclusive negotiation period with OpenAI, which had been in talks to purchase the company outright for $3 billion. Those talks “hit a roadblock after Microsoft, OpenAI’s largest investor, objected to some of the terms,” according to The Wall Street Journal.

“OpenAI didn’t want to give Microsoft access to Windsurf’s technology. The deal Microsoft struck to invest in OpenAI gives it access to “all of the startup’s intellectual property,” per WSJ.

“Microsoft has made exceptions in the past, including with OpenAI’s recent purchase of IO, a hardware device startup founded by Jony Ive, Apple’s former design chief,” The New York Times reports. In that case, Microsoft “did not see itself in the AI hardware consumer device business,” writes NYT, noting “that was not the case with Windsurf, which creates AI-powered coding software, a business that Microsoft competes in with its own product, Copilot.”

The Google deal underscores intense competition among Big Tech firms for AI talent and technology, following Meta Platforms’ $14.3 billion investment in Scale AI as part of a deal to hire its CEO Alexandr Wang.

WSJ describes the “acquihire” trend as “a way to attract top startup talent while avoiding the scrutiny of antitrust regulators,” noting that last year Google paid $2.7 billion to re-hire computer scientist Noam Shazeer as part of a licensing deal with his startup Character.AI.

“Amazon and Microsoft have also absorbed AI talent in this fashion, with the Adept and Inflection deals, respectively,” writes CNBC.

The Windsurf deal with Google is described by WSJ as a blow to OpenAI, “which is racing against other tech companies to build AI coding assistants, one of the largest new markets enabled by generative AI.”

In a blog post, Windsurf says Head of Business Jeff Wang will serve as interim CEO. While VP of Global Sales Graham Moreno steps up as president.

Regarding the Cognition deal, Wang followed up with a note to the Windsurf team: “I’m absolutely delighted to share with you that Windsurf is being acquired by Cognition. Our world-class team will be joining forces with the iconic company that created Devin, the first autonomous software engineer.”

“Our customers, as well as our robust pipeline, will remain in steady hands and enjoy better product innovation than ever,” he added. “And finally, Windsurf’s unique IP will also become integrated into Cognition, helping the joint team continue to push the frontier of AI coding capabilities.”