The tech world is buzzing with the rise of AI-powered coding startups. These “code-gen” companies are raking in massive investments, with hopes of replacing human programmers – at least partially. Their tools are smarter and faster than ever, automating repetitive tasks like writing basic code or formatting.
This shift is changing the role of developers and could Replace entry-level positions with AI. In 2024, the number of new employees with less than a year of experience dropped by 24%.
One standout is Cursor, a San Francisco-based startup that raised $900 million, valuing the company at over $10 billion. They have just 60 employees.
Meanwhile, Windsurf, the company behind Codeium, is in talks to sell to OpenAI for over $3 billion. Codeium converts plain English into code.
Even tech giants like Google, Microsoft, and Amazon are using AI-generated code in their systems. Microsoft uses AI for 30% of its code.
While some companies are seeing rapid revenue growth – like Cursor, which hit $100 million in annual revenue, and Windsurf, which made $50 million in under a year – they still face profitability risks. Their margins are thin due to reliance on AI models from companies like Anthropic or OpenAI, which charge per request.
Another risk is being overtaken by big tech players like Microsoft’s GitHub Copilot, which generated $500 million in revenue in 2024 and has over 15 million users. Windsurf and Cursor are developing their own AI models to cut costs, but training these models requires massive investments. Some companies, like Replit, have already backed out of these plans.