The AI Talent Warring States Period: Google "Reverse Acquires" Windsurf to Outmaneuver OpenAI

1. "Unexpected Morning" — Breaking News of the Deal Collapse

6:00 AM on July 11 (Pacific Time). At Windsurf headquarters overlooking the Bay Bridge in San Francisco, the team was working through the night to finalize documents for the investor signing. In the midst of this, Bloomberg's "Deal Off" alert vibrated on smartwatches.

"The exclusive negotiation period with OpenAI expired at 5 AM this morning." While the deal team held their breath, CEO Varun Mohan quietly closed his laptop. "Move on. Let's catch the next wave." This statement would later become the turning point that led to the "shock move to Google."Bloomberg.com

2. Behind the Deal Collapse — The Trap of IP Sharing with Microsoft

The biggest factor in the negotiation breakdown was reportedly the IP sharing clause proposed by Microsoft, which has a capital partnership with OpenAI. The gap between MS wanting to retrain the Cascade model's weight data on Azure Cloud and Windsurf wanting to protect its proprietary stack could not be bridged. According to TOI, the board of directors withheld approval due to the "risk of IP offsetting." As a result, the 90-day exclusivity period of the LOI signed in May expired.The Times of India

3. Google's "Reverse Acquihire" — The Intent Behind the $240 Million

Just 18 hours after the exclusivity period ended, DeepMind CEO Demis Hassabis made a direct call. The proposal was "no equity, just a $240 million technology usage license fee and the joining of the management team." Mohan immediately responded, "We can maintain the company's independence, and employees won't leave." According to Reuters, by not acquiring equity, Google fast-tracked the antitrust review line, cleverly avoiding the "Acquihire Disclosure Act" being considered by the U.S. Congress.Reuters

4. "Agent × Agent" — The Chemical Reaction of Cascade and Gemini

The technical aim is clear. Windsurf's "Cascade" is an agent-based code generation AI that automates everything from test execution to deployment. Meanwhile, Google Gemini is a massive multimodal platform. The DeepMind development team says, "Connecting Cascade's script execution capabilities to Gemini's inference engine brings us closer to 'self-healing software'." In fact, an internal survey leaked showing that 73% of Windsurf's top 1,000 users "welcome the Google integration."Cybernews

5. The Frenzy and Irony on Social Media

• X (formerly Twitter)

  • "Google's solo victory. Is OpenAI 'acquisition weary'?" — VC Analyst @SpirosMargaris X (formerly Twitter)

  • "Scoop: Windsurf's CEO and others heading to Google" — NYTimes Reporter @MikeIsaac X (formerly Twitter)

• Hacker News

  • User xyst"In the end, Google will just freeze the IP and shelve it."Hacker News

• Reddit /r/technology

  • A thread titled "Did MS interfere with OpenAI's $3B deal?" temporarily became the top hot post.Reddit

There are also many positive voices. In the developer community Dev.to, a blog post saying "If Gemini and Cascade are integrated, VS Code will be unnecessary" went viral, garnering over 12,000 likes.DEV Community

6. The Startup's Perspective — The Fate of the Remaining 250

While the $240 million in license revenue will be distributed to shareholders, Windsurf itself will continue its SaaS business. Interim CEO Jeff Wang declared in an internal email, "The enterprise Cascade Cloud will be GA by the end of the year," and reissued stock options to all employees to prevent attrition. Investors are increasing pressure for an IPO "within two years," but Wang responded on internal Slack, "Build value before earning." The startup's "second chapter" begins.Reuters

7. Industry Impact — A New Phase in the Talent War

The large-scale "Reverse Acquihire" by FAANG is the second example since Amazon×Cohere in 2024. This scheme, comprising <① no equity acquisition ② high license fees ③ key personnel employment>, is beginning to be called the "Google model" in investment banking circles. Experts analyze it as "the decisive moment when the supremacy battle for code generation AI shifted from 'GPU acquisition' to 'talent acquisition.'"TechCrunchThe Economic Times

8. Regulatory Gaze

On the same day, the U.S. Federal Trade Commission (FTC) stated, "We may apply review authority to transactions aimed at talent acquisition." European Commission Vice President Margrethe Vestager also commented, "We will watch closely to ensure license transactions do not become a smokescreen." Conversely, some believe regulation under current law is difficult, reigniting debates over legislative measures.Reuters

9. OpenAI's Next Move

In a public statement, OpenAI declared, "We will review our M&A-first strategy and focus resources on in-house development." However, internally, dissatisfaction is erupting over "compensation tables that fall short compared to Google/Meta." To prevent talent attrition, they raised the valuation of stock units from $180 to $260. CEO Sam Altman reportedly encouraged employees on Slack, saying, "We lost this battle, not the war."Top AI Tools List - OpenTools

10. Future Scenarios

1. Official Integration of Gemini × Cascade
   A public preview announcement is likely at Google Cloud Next in Q4 2025.

2. Windsurf Standalone IPO
   With license revenue and the Google contract as achievements, they aim for a Nasdaq listing in early 2027.

3. Regulatory Strengthening
   If the new bill in the U.S. Congress is passed, similar "reverse acquihires" may be subject to pre-notification requirements.

In any case, this event will be remembered as a symbolic incident indicating that the competitive axis of the AI industry has shifted from "model performance" to "the binding power of talent and intellectual property."