By Britney Nguyen
As the AI talent wars escalate, Google’s new arrangement with startup Windsurf shows tech companies see a lot of value in coding assistants
Alphabet Inc.’s Google closed out last week with a deal signaling to some analysts that the already heated war for artificial-intelligence talent is only getting hotter. It also underscored that there’s big money in offering tools for AI-based coding assistance.
The tech giant is hiring AI-coding startup Windsurf’s Chief Executive Varun Mohan and co-founder Douglas Chen, as well as some of its research and development team, the startup said in a statement on Friday. The agreement comes after the two companies made a deal for Google (GOOGL) (GOOG) to pay $2.4 billion for the AI talent and nonexclusive licensing rights to some of the startup’s technology, CNBC reported, citing an unnamed person familiar with the matter.
See more: Is Meta’s pricey AI hiring spree worth it? This analyst has doubts.
A spokesperson from Google DeepMind, which focuses on AI research and development, told CNBC that it’s “excited to welcome some top AI coding talent from Windsurf’s team to Google DeepMind to advance our work in agentic coding,” and that the company is “excited to continue bringing the benefits of Gemini to software developers everywhere.”
Google did not immediately respond to a MarketWatch request for comment on the deal.
The $2.4 billion deal shows the “intensely costly war for talent in this sector,” Rosenblatt Securities analyst Barton Crockett said in a note to clients on Monday, as well as surging demand for AI coding assistants.
In June, Meta Platforms Inc. Chief Executive Mark Zuckerberg announced that the tech giant had hired several AI researchers from other companies, including from OpenAI, following its $14 billion investment in AI startup Scale AI earlier in the month. Zuckerberg reportedly offered some talent $100 million pay packages to join Meta’s superintelligence team.
In a previous note about Zuckerberg’s hiring spree, Crockett said: “It seems probably not great for the giants of [large language models] to bleed off their capital into the mutual-assured carnage of endless battles for talent.” However, it is possible, he said, that Meta “sees its efforts here as more one and done than ongoing.”
After the latest Google deal, Crockett said that “AI coding agents are emerging [as] the most sought after feature in GenAI at the moment.”
Meanwhile, the deal should benefit Alphabet’s cloud unit, according to analysts at Baird. The new Windsurf talent should help Google’s cloud business “compete more effectively with” Microsoft Corp.’s Azure platform and Amazon.com Inc.’s (AMZN) Amazon Web Services, the analysts said in a Sunday note to clients.
“By licensing one of the most enterprise-focused and secure agentic coding tools, Google should be able to enhance Gemini-powered tools and coding assistants with Windsurf capabilities,” the analysts said, which should help it take on Microsoft’s GitHub Copilot and Amazon CodeWhisperer.
The Baird team said the deal shows “the importance of speed-to-market for enterprise GenAI tools,” while keeping Windsurf out of reach of competitors. Apart from boosting Google’s cloud business, Windsurf offers technology that Google engineers can use for their own projects, the analysts noted.
According to data from Sensor Tower cited by Visual Capitalist, 29% of ChatGPT queries in March and April were related to software development.
“We believe the deal also highlights the strategic importance of AI agents/agentic tools for productivity enhancements, not just in coding and software development workflows, but over time, across many corporate functions,” the analysts said, including sales, legal, and finance. “For its part, Windsurf also appears to be casting a wider net to bring agentic AI tools across more verticals to help enterprises.”
Overall, Google’s agreement with Windsurf “mirrors the [increasingly] popular partnership structure between large technology companies and some fast-rising GenAI start-ups that upgrades talent and provides access to key new GenAI products, without facing the scrutiny of equity ownership or acquisition,” the Baird team said.
See more: Meta’s stock hits a record high as Mark Zuckerberg goes on an AI hiring spree
Windsurf had previously discussed being acquired by OpenAI for $3 billion, but the deal fell apart after the ChatGPT maker’s largest investor, Microsoft (MSFT), did not agree to terms limiting it from accessing Windsurf’s intellectual property, Bloomberg reported, citing people familiar with the matter.
The deal between Google and Windsurf points to some problems for OpenAI, Rosenblatt’s Crockett wrote. For one, although OpenAI’s partnership with Microsoft gives it the advantage of access to large amounts of compute, Crockett noted that the recent disagreement ended up helping OpenAI’s rival Google.
-Britney Nguyen
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
07-14-25 1751ET
Copyright (c) 2025 Dow Jones & Company, Inc.