Heads up, Microsoft just released the August VS Code update (v1.104) and there are some pretty big changes if you’re using Copilot/AI inside the editor:
- Auto model selection is live. If you pick “Auto” in the chat model dropdown, VS Code will choose the best model for the request instead of you having to manually flip between GPT-5, Claude Sonnet 4, GPT-4.1, Gemini Pro 2.5, etc.
- Extension API for models: extensions can now contribute their own models into the Chat model picker.
- Security tweaks: VS Code will now prompt you before editing sensitive files (dotfiles, system folders, anything outside your workspace). Agent mode also has better safety prompts.
Feels like a step toward AI becoming just another extension in VS Code rather than a separate “special” integration. Could be a way for orgs to plug in fine-tuned LLMs without messing with the editor core.