BREAKING: Google Just Hijacked OpenAI’s Biggest Acquisition

We’re watching the biggest breakup in AI—with multibillion-dollar consequences, playing out in real time.

Good morning AI entrepreneurs & enthusiasts,

The $3B acquisition deal between OpenAI and the AI coding startup Windsurf has officially unraveled — and instead of fading into the background, the team has landed squarely at Google. The entire episode reveals deepening cracks in the OpenAI–Microsoft partnership.

After Microsoft refused to grant IP carveouts, Google stepped in with a $2.4B licensing and talent package — a massive win that underscores just how tense things have become between AI’s two biggest names.

In today’s AI news:

• Google snaps up Windsurf talent after OpenAI deal falls apart

• Moonshot AI’s K2 dominates open-source benchmarks

• Meta acquires PlayAI for ultra-realistic voice tech

• Study shows AI coding tools can slow down veteran devs

• Today's Top Tools & Quick News

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🏄♂️ Google wins Windsurf as OpenAI deal falls apart

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The News: Google will license Windsurf’s tech and hire its CEO Varun Mohan, co-founder Douglas Chen, and several researchers in a $2.4B deal — just weeks after a $3B acquisition with OpenAI fell through due to conflicts with Microsoft’s terms.

Details:

• Mohan and Chen will join Google to lead agentic coding under Gemini.

• Windsurf remains independent, now led by interim CEO Jeff Wang.

• Microsoft’s refusal to exempt IP from its OpenAI agreement caused the exclusivity window to expire.

• Google secured a non-exclusive tech license allowing Windsurf to continue enterprise operations.

Why it matters: This would’ve been OpenAI’s largest acquisition, and its collapse spotlights growing tension with Microsoft. Google’s quick pivot not only blocks OpenAI but also strengthens its hand in the race for AI talent and coding tools, reflecting a broader trend toward talent-first, regulatory-light strategies.

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MOONSHOT AI 🚀 K2 model sets new open-source standard

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The News: Moonshot AI's Kimi-K2 is a 1T parameter Mixture-of-Experts model outperforming even frontier models on code and STEM tasks — and showing early signs of best-in-class agentic capability.

Details:

• K2 beats Claude 4 Opus and GPT-4.1 on multiple coding and math benchmarks, including 65.8% SWE-bench Verified and 53.7% on LiveCodeBench.

• It can autonomously manage multi-step workflows using up to 17 tools, making it one of the most capable agentic models.

• MuonClip — a novel optimizer — enabled training at this scale with zero crashes.

• K2 is currently unimodal, but Moonshot plans to add reasoning and multimodal capabilities soon.

Why it matters: K2 isn’t just a technical feat — it’s a proof-of-concept that open-weight models can match or surpass proprietary giants. With accessibility and cost advantages, Kimi-K2 could reshape how the world adopts advanced AI.

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META 🗣️ Meta acquires PlayAI for ultra-realistic voice tech

The News: Meta has acquired PlayAI, a California-based startup known for advanced voice cloning and humanlike AI-generated speech. The entire team will join Meta under Johan Schalkwyk, a recent hire from Google and Sesame AI.

Details:

• PlayAI’s voice engine supports 30+ languages, capturing emotion, rhythm, and intonation with high fidelity.

• The team will support Meta AI, wearables, audio creation, and Character AI initiatives.

• Terms of the deal weren’t disclosed, but the acquisition follows Meta’s recent $14.3B investment in ScaleAI.

• ScaleAI CEO Alexandr Wang now leads Meta’s Superintelligence Labs, suggesting tighter alignment with Meta’s broader AI ambitions.

Why it matters: Meta is doubling down on humanlike AI experiences — not just in chat, but in sound. With PlayAI’s technology and Schalkwyk’s leadership, Meta’s AI characters could soon sound as real as they look — creating immersive, emotionally resonant agents across Facebook, Instagram, and WhatsApp.

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METR ⚙️ Study: AI coding tools slow veteran devs down

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The News: A new study by METR reveals that experienced developers were 19% slower when using AI coding assistants like Cursor Pro on real-world codebases, even though they expected a 24% speedup.

Details:

• The research tracked 16 open-source developers across 246 tasks on projects with over 1M lines of code.

• AI tools like Cursor Pro increased task time by 19%, despite high initial expectations.

• Developers spent more time prompting, reviewing output, and waiting for responses than directly coding.

• Despite the lag, many still felt more productive — highlighting a perception gap.

Why it matters: The study suggests that companies banking on AI for developer speed gains should reconsider their assumptions. The true value may lie in reducing cognitive load, not accelerating delivery.

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Today's Top Tools

• BioEmu – Microsoft’s open AI for protein structure prediction

• Devstral – Mistral’s agent-optimized open model family

• Speech in Flow – Animate images with voice in Google Flow

• Qwen Chat – Alibaba’s powerful model, now in desktop app form

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Quick News

• OpenAI delays open-weight release: The company has postponed releasing open-weight models, citing the need for more rigorous safety evaluations. CEO Sam Altman emphasized that once model weights are released, they cannot be retracted, underscoring the irreversible nature of the decision.

• Tesla integrates Grok into vehicles: All new Tesla vehicles now come with Grok, xAI's assistant, embedded in the onboard interface. The assistant, released via the 2025.26 update, enables voice-driven command and reasoning capabilities with various personality modes like "Storyteller" and "Unhinged."

• xAI revises Grok-3 filters: After a wave of controversial outputs—including ignoring sources critical of Elon Musk—xAI published a detailed review of Grok-3's failure points and released an updated behavior filtering system. The company attributed previous missteps to internal directives from a former employee.

• Microsoft debuts Phi-4-mini: A new compact model optimized for mobile and embedded systems, Phi-4-mini brings strong on-device reasoning to edge devices with low latency. It’s available now through Azure AI Foundry, Hugging Face, and NVIDIA's API Catalog.

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