OpenAI's o3 and o4-mini... OH MY!

Top News

OpenAI unleashes new models: Confused about which AI model you should use? Bad news! There are even more good options in the market today. OpenAI dropped o3, and o4-mini today, which TechCrunch calls “new AI reasoning models designed to pause and work through questions before responding.” Early reviews seem positive, but the market is still digesting the new code. What matters for founders today is that the pace of foundation model development is not slowing — and that means better tools to build with.
Mega-charges for chip giants: Chip giants Nvidia and AMD are taking big charges due to the US government clamping down on some of their chips that they hoped to sell in China. Nvidia’s H20 and AMD’s MI308 chips are now worth a lot less. So much that Nvidia is taking a $5.5 billion charge, while AMD expects an $800 million hit. The trade war taketh, and the trade water taketh even more.
Hammerspace raises $100M: Hammerspace wants to make corporate data that is unstructured and often scattered around the world instantly available for its corporate customers. Why does that matter? Well, if you are going to ingest data into AI workloads, and you don’t want to waste GPU time (money), you had better have all your information available now, right? Similar to Tailscale, Hammerspace proves that there’s gold to be made selling AI picks and shovels.

TWiST500

Often we have news about one TWiST500 company or another to chew on. Today is something special. I’ll let the news do the talking:

OpenAI is in talks to pay about $3 billion to acquire Windsurf, an artificial intelligence tool for coding help, CNBC has confirmed.

Windsurf is the rebrand of Codeium, a TWiST500 company that Jason and I profiled back in December. At the time, its Windsurf development environment combined agents and copilots into a single package. People seemed hype about it, but the company’s growth I think got a bit lost as Cursor — a rival — scaled from $100 million ARR to $200 million ARR in something around a quarter. That was nuts.

But OpenAI would not be considering plunking $3 billion down on a company valued at around $1 billion in its last private round if it wasn’t doing very well.

Now, from the other side of the table, what does the TWiST500 stalwart get out of the potential transaction? That’s simple: differentiation.

Consider OpenAI’s position on the market: It offers closed-source models that it sells access to. Very good and very cool, but application layer companies like Windsurf — which, by the by, has used Anthropic tech before — are accumulating a big chunk of market value from AI, and are often predicated on the underlying tech of others.

Why let Windsurf have all the fun? For 1% of OpenAI’s current worth, it can snake a growing product, buy developer goodwill, and a lot of application layer momentum as well? Genius at twice the price, I reckon. — Alex

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This Week in Startups

E2112: On a very special TUESDAY EDITION of This Week in Startups, Alex chats with the founders of not one but TWO companies at the forefront of so-called “Vertical AI.” (That is, AI applications tailored for specific industries or use cases!) First up, Abacus founder David Moscatelli tells us about how they help banks and insurers install data-secure LLM systems. Then, Victor Riparbelli walks us through how his company, Synesthesia, is turning internal documents into scalable AI video.

E2111: On Monday’s TWiST, Jason, Lon, and Alex chat about Blue Origin’s all female space crew, including pop star Katy Perry, plus Hugging Face’s push into the robot market and Jack Dorsey’s divisive “delete IP law” tweet. Then they break down the controversy over Figure AI’s valuation, and check out some social media insights from Basecamp’s own David Heinemeier Hansson and Amazon’s Jeffrey Bezos.

E2110: On a big Friday show, Jason, Alex and Lon talk about Palantir’s bold new fellowship program for ambitious high schoolers who don’t mind skipping college, and DoorDash’s new Coco burrito-delivery bots. Plus on the debut of our new “Tips from the Trenches” segment, the gang surveys various suggestions for landing your startup’s very first customer. All that AND Office Hours with the CEOs of AI agent maker BRX and calendar-based marketers InviteJet.

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Hubspot for Startups: Smart founders aren't piecing together random tools. Hubspot is the customer platform that thousands of startups use to scale efficiently. Get up to 75% off plus 3 months of Perplexity AI for free. Go to hubspot.com/startups.

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LAUNCH Accelerator

Applications are open for the 34th cohort of the LAUNCH Accelerator; a 14-week program focused on fundraising and growth. We invest $125K in our accepted companies and help them raise their pre-seed or seed round. Submit your application at LAUNCH Accelerator.

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