Google, Scale AI's largest customer, plans split after Meta deal
Alphabet's Google, the largest customer of Scale AI, plans to cut ties with Scale after news broke that rival Meta is taking a 49% stake in the AI data-labeling startup, five sources familiar with the matter told Reuters.
Google had planned to pay Scale AI about $200 million this year for the human-labeled training data that is crucial for developing technology, including the sophisticated AI models that power Gemini, its ChatGPT competitor, one of the sources said.
The search giant already held conversations with several of Scale AI's rivals this week as it seeks to shift away much of that workload, sources added. Scale's loss of significant business comes as Meta takes a big stake in the company, valuing it at $29 billion. Scale was worth $14 billion before the deal.
Concerns and Reactions
Companies that compete with Meta in developing cutting-edge AI models are concerned that doing business with Scale could expose their research priorities and road map to a rival, five sources said. By contracting with Scale AI, customers often share proprietary data as well as prototype products for which Scale’s workers are providing data-labeling services. With Meta now taking a 49% stake, AI companies are concerned that one of their chief rivals could gain knowledge about their business strategy and technical blueprints.
Google, Microsoft, and OpenAI declined to comment. xAI did not respond to a request for comment.
Rivals See Openings
The bulk of Scale AI's revenue comes from charging generative AI model makers for providing access to a network of human trainers with specialized knowledge - from historians to scientists, some with doctorate degrees. The humans annotate complex datasets that are used to "post-train" AI models, and as AI models have become smarter, the demand for the sophisticated human-provided examples has surged, and one annotation could cost as much as $100.
Founded in 2016, Scale AI provides vast amounts of labeled data or curated training data, which is crucial for developing sophisticated tools such as OpenAI's ChatGPT.
This will provide an opening for Scale AI's rivals to jump in. "The Meta-Scale deal marks a turning point," said Jonathan Siddharth, CEO of Turing, a Scale AI competitor. "Leading AI labs are realizing neutrality is no longer optional, it's essential."
Labelbox, another competitor, will "probably generate hundreds of millions of new revenue" by the end of the year from customers fleeing Scale, its CEO, Manu Sharma, told Reuters.
Conclusion
As part of the deal, Scale AI's CEO, Wang, will take a top position leading Meta's AI efforts. Meta is fighting the perception that it may have fallen behind in the AI race after its initial set of Llama 4 large language models released in April fell short of performance expectations.
Published - June 14, 2025 10:06 am IST
Tags: technology (general), internet, Artificial Intelligence, emerging technologies, science and technology
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