Why is OpenAI buying Windsurf?

Prediction:

OpenAI will buy Windsurf and then make it free with one of the cheaper OpenAI plans, effectively trying to kill the other IDEs and getting access to data which helps it compete/better against Claude and Gemini.

Google needs to launch its equivalent, and Anthropic needs to figure out their plan.

Why couldn’t OpenAI vibe code their own Windsurf/Cursor competitor? (Serious question).

OpenAI is a technology company constantly in search of productization (ChatGPT, Sora, Dall-e), and they’ve been really good at creating product interest that converts to acquisition. An IDE is much more complex than a chat app, but given their literal billions of dollars and familiarity with developer tooling, this is a down-stack build that they could dogfood off their own tech. And especially given that some of these tools were built by tiny teams (Cursor is what, 10 people?), is this like Google and Facebook’s implicit admission that they can’t “build and grow” anymore, and need to turn to acquisitions to fuel growth?

A few thoughts:

1) I agree that the moat for these companies is thin. AFAICT, auto-complete, as opposed to agentic flows, is Cursor's primary feature that attracts users. This is probably harder than the author gives it credit for; figuring out what context to provide the model is a non-obvious problem - how do you tradeoff latency and model quality? Nonetheless, it's been implemented enough times that it's mostly just down to how good is the underlying model.

2) Speaking of models, I'm not sure it's been independently benchmarked yet, but GPT 4.1 on the surface looks like a reasonable contestant to back auto-complete functionality. Varun from Windsurf was even on the GPT 4.1 announcement livestream a few days ago, so it's clear Windsurf does intend to use them.

3) This is probably a stock deal, not a cash deal. Not sure why the author is so convinced this has to be $3B in cash paid for Windsurf. AFAIK that hasn't been reported anywhere.

4) If agentic flows do take off, data becomes a more meaningful moat. Having a platform like Cursor or Windsurf enables these companies to collect telemetry about _how_ users are coding that isn't possible just from looking at the repo, the finished product. It opens up interesting opportunities for RLHF and other methods to refine agentic flows. That could be part of the appeal here.

>Some are better at the auto complete (Copilot), others at the agent flow (Claude Code). Some aim to be the best for non-technical people (Bolt or Replit), others for large enterprises (again, Copilot). Still, all of this "differentiation" ends up making a 1-2% difference in product. In fact, I can't stress enough how much the UX and core functionality of these tools is essentially identical.

Is this exclusively referring to the ux or full functionality?

Because I can tell you straight away that cursor (Claude) vs copilot is not a 1% difference. Most people in my company pay their own cursor license even though we have copilot for available for free.

It is a talent and a distribution play. Talent: obvious.

Distribution: OpenAI believes the marginal token they sell will be accretive to their bottom line, so the goal then is to deliver as many tokens as possible. Windsurf already has 1k+ enterprise logos and allegedly millions of downloads. 2 m tokens × $0.00001 gross / token = $20/seat/mo; if windsrf runs 500k seats, oai books $120 m/yr gross @ 90% margin.

I saw a similar dynamic play out in the UK with Pub (bar) companies. By mid-2000s, the major players were failing. Margins were nearly zero, thanks to rising costs, and securlar decline in demand, plus they had too much expensive term debt.

But they represented profitable sources of distribution for the beer makers. So Heineken went on a buying spree. They didn't care about making money from the pubs themselves and were happy to run them break-even. This is because they then had a controlled channel of distribution for their beer (and they made a profit on every pint they shipped).

The switching costs are very different here, and the market is still so nascent. It is a thin product and vscode‑copilot can catchup. But 1% of enterprise value ($3bn of $300bn) is not a lot to gamble on owning the #2 horse in the most promising AI end market today.

This is poor analysis. It claims OpenAI is spending “3 of its 40” billion in raised capital on Windsurf. Who said this was an all cash deal?

And so if you’re purchasing with equity in whole or in part, the critical question is, do you believe this product could be worth more than $3b in the future? That’s not at all a stretch.

Cursor is awfully cozy with Anthropic, as well, and so if I’m OpenAI, I don’t mind having a competitive product inserted into this space. This space, by the way, that is at the forefront of demonstrating real value creation atop your platform.

Ironically, 3 billion is proof that these tools do not work as expected and won’t replace coders in the near future.

Otherwise, why spend 3 billion if you could have it cooked up by an AI coding agent for (almost) free?

Recent and related:

OpenAI looked at buying Cursor creator before turning to Windsurf - https://news.ycombinator.com/item?id=43716856 - April 2025 (115 comments)

OpenAI in Talks to Buy Windsurf for About $3B - https://news.ycombinator.com/item?id=43708725 - April 2025 (44 comments)

Reminds me of Snowflake purchasing Streamlit. A sign of a big wallet and slowing internal execution on the part of the purchaser rather than an indication of the compelling nature of the acquisition.

The article opines "though it makes me wonder just how bad OpenAI's relationship with Microsoft has gotten if they no longer have access to GitHub". Is their relationship known to be souring?

To me it's fairly straightforward.

OpenAI is predominantly a consumer AI company. Anthropic has also won over developer hearts and minds since Claude 3.5. Developers are also, proportionally, the largest uses of AI in an enterprise setting. OpenAI does not want to be pigeonholed into being the "ChatGPT company". And money spent now is a lot cheaper than money spent later.

But this is all just speculation anyways.

It’s a vehicle that can hit the enterprise, broad user base, training data, and gain coverage of a competitor market (I’m sure the primary LLM in windsurf is Claude just like it is in cursor).

Beyond that, these IDEs have a potential path to “vibe coding for everyone” and could possibly represent the next generation of general office tooling. Might as well start with a dedicated product team vs spinning up a new one.