Google, the largest customer of AI data-labeling startup Scale AI, is planning to sever ties with the company following Facebook parent Meta’s acquisition of a 49% stake in Scale, valued at $29 billion, according to five sources familiar with the matter. The move, reported by Reuters, has raised concerns among Scale’s major clients, including Microsoft and Elon Musk’s xAI, who are also reportedly reconsidering their partnerships due to fears of proprietary data exposure to a key rival. The shift underscores growing concerns among AI developers about data security and competitive risks as industry giants like Meta deepen their influence in the AI ecosystem.
What is Meta’s investment in ScaleAI
Meta’s $14.3 billion investment in Scale AI, previously valued at $14 billion, includes the transition of Scale’s CEO, Alexandr Wang, to Meta, where he will lead efforts to develop “superintelligence.” This has intensified worries among Scale’s clients, particularly generative AI companies, that their sensitive research priorities and technical blueprints could be accessed by Meta through Scale’s data-labeling operations.Google, which had planned to pay Scale $200 million this year, has already begun discussions with Scale’s competitors to shift its workload, sources said. The company had been diversifying its data service providers for over a year, but Meta’s investment has accelerated Google’s push to exit all key contracts with Scale, a process that could move quickly due to the structure of data-labeling agreements. Microsoft and xAI are also pulling back, while OpenAI, a smaller Scale customer, scaled down its reliance months ago but will continue working with Scale as one of its many vendors, according to OpenAI’s CFO.
Why Google and Microsoft leaving is bad news for ScaleAI
Scale AI, which serves self-driving car companies, the U.S. government, and generative AI firms, relies heavily on a few major clients. A Scale spokesperson emphasized that the company remains independent and committed to safeguarding customer data, stating, “Our business remains strong, spanning major companies and governments.” However, the potential loss of key clients like Google could significantly impact Scale’s operations.