Google, Scale AI’s largest customer, plans to terminate its relationship with the data-labeling startup following Meta’s acquisition of a 49% stake, sources familiar with the matter confirmed for Reuters. The search giant had intended to pay approximately $200 million to Scale AI this year for human-labeled training data critical for developing AI technologies, including its ChatGPT competitor, Gemini.
Scale AI generated $870 million in revenue in 2024, with Google contributing approximately $150 million last year. The company’s core business revolves around providing AI model makers access to a network of specialized human trainers who annotate complex datasets used to “post-train” AI models. As models become more sophisticated, demand for high-quality human-provided examples has increased, with individual annotations sometimes costing up to $100.
Industry-Wide Shift Underway
Reuters notes that several major technology companies are reassessing their partnerships with Scale AI. Microsoft, OpenAI, and Elon Musk’s xAI are all reportedly looking to reduce or eliminate their reliance on Scale’s services. OpenAI had already begun pulling back from Scale months ago, although it spends significantly less on data labeling than Google.
Companies competing with Meta in developing advanced AI models express concerns that continued business with Scale AI could expose their research priorities and strategic roadmaps. When contracting with Scale, customers often share proprietary data and prototype products, raising concerns that Meta could gain insights into competitors’ business strategies and technical specifications.
Competitors See Opportunity
The Meta-Scale deal creates opportunities for competitors like Turing, Labelbox, Handshake, and Mercor. These companies report a surge in interest following the announcement.
“The Meta-Scale deal marks a turning point,” said Jonathan Siddharth, CEO of Turing, in a statement. “Leading AI labs are realizing neutrality is no longer optional, it’s essential.”
The deal values Scale AI at $29 billion, more than double its previous valuation of $14 billion. As part of the arrangement, Scale AI CEO Alexandr Wang will assume a leadership position overseeing Meta’s AI efforts. This move comes as Meta works to strengthen its position in the AI race after its initial Llama 4 language models, released in April, reportedly underperformed expectations.
