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OpenAI's Crazy $3B Bet on a Wrapper 🤯

OpenAI's Crazy $3B Bet on a Wrapper 🤯

And $1B company's CEO is sure both you and him would be out of job soon

Neer Varshney
May 07, 2025

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In This Newsletter

OpenAI’s astounding $3 billion deal to acquire WindSurf.
Fiverr CEO thinks both him and you would be out of job soon
Google’s special coding model
Elon Musk-OpenAI drama update
Best meme, tweet of the week!
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Life has come full-circle from when I wrote about canceling my ChatGPT Plus subscription back in February, in favor of paying $20 for a wrapper aimed at coding.

The product I began paying that $20 to was Cursor, a VS Code wrapper aimed at coding with AI.

ChatGPT parent OpenAI, which has a minor stake in Cursor parent Anysphere, reportedly made a bid to acquire it.

Cursor said it was too good and popular to be sold, even to a $300 billion AI giant.

OpenAI has now decided to shell out a shocking $3 billion to purchase its lesser-used rival WindSurf, in line with media reports from a month ago.

The question many in tech are pondering over is — Why?

Three billion dollars. For a VS Code wrapper. That too, just a week after OpenAI released its open-source coding agent Codex.

I have been struggling to process it.

Making Sense of Windsurf Acquisition

Windsurf used to be named Codeium, and I gave it a shot in that avatar roughly two years ago.

It wasn’t that impressive at the time, and Github Copilot was clearly the better choice, beside using general-purpose AI chat apps like ChatGPT and Claude.

This was until Cursor and Bolt came into the picture with AI agents aimed at coding that were a clear notch up.

Codeium launched the Windsurf Editor IDE in response last November, but it simply didn’t catch on as much.

It isn’t just me saying this.

WindSurf, while a decent tool, wasn't exactly setting the world on fire in terms of user numbers or market buzz, especially compared to established players or even up-and-comers like Cursor.

It certainly wasn't the name on everyone's lips when discussing the future of AI development tools.

At a reported $100 million annual recurring revenue (ARR), the valuation OpenAI slapped on Windsurf represents a 30x multiple. That's... a lot.

So, what gives? Why would OpenAI, the behemoth that makes the underlying AI magic many wrappers rely on, spend a fortune on what seems like a relatively minor player in the wrapper ecosystem?

From the outside looking in, Windsurf doesn’t seem to have the distribution expected of a $3 billion company. It doesn’t appear to have a significant technical moat.

Any data it may possess would likely be a drop in the ocean compared to what OpenAI already has from coders, both through its LLMs and the ChatGPT interface.

Is this a strategic masterstroke I am missing? Possibly. Sam Altman usually plays 4D chess.

Or, could this acquisition be more about positioning and investment metrics for a rapidly developing space that's seeing VCs and private equity (sometimes, let's be honest, irrationally) pouring money in?

Is it about making OpenAI look like it's aggressively expanding its enterprise footprint, regardless of the target's immediate value?

We'll probably only know the real "why" a year or two down the line.

But in the meantime, huge congratulations to Varun Mohan and the Windsurf team on their incredible job and this massive exit.

I’d personally stick with Cursor. Their refusal to sell (for now) is reassuring.

Fiverr CEO Thinks Both You and Him Could Be Out of Job Soon 🤷‍♀️

Fiverr is an Israeli marketplace company listed in the US with a market valuation of nearly a billion dollars. It is known to host freelancers providing low-cost services.

In a heartfelt note to employees, CEO Micha Kaufman said all of the employees’ jobs are at risk. “Heck, it’s coming for my job too.”

According to Kaufman, no product guy, data scientist or lawyer is safe from it.

Google Takes Things Further on Coding Models

Google is set to host its flagship developer conference I/O in a couple of weeks and has launched a special “I/O” variant of Gemini 2.5 Pro, geared at front-end coding.

Even the regular Gemini 2.5 Pro is fast becoming the go-to model for many developers ahead of Claude 3.7 Sonnet and the new launch could take things further for the giant AI underdog.

The I/O variant is now dominating at the top of the charts in WebDev LMArena but I am yet to personally give it a shot.

Other Happenings

OpenAI has at least partially backtracked on its plan to restructure into a for-profit entity amid the threat of Elon Musk's lawsuit, instead looking at a public benefit corporation.
According to a report from The Information, this would also cut investor Microsoft's share of revenue from the company.
Amazon may also be jumping on the AI coding agents bandwagon with “Kiro.” [via Business Insider]
Indian government-backed Sarvam AI has launched voice models geared toward local languages that sound natural.
LTX Studio has unveiled an open-source video model called LTXV.
AI Agents on X like Grok and AskPerplexity are playing a crucial “fact-checker” role in the India-Pakistan clashes, replacing media houses, in what could become default user behavior going forward.
A man shot dead years ago in a road-rage incident was eerily reincarnated by his family in court using AI video. [via the NY Post]