Scale AI may lose partnership with Microsoft, Google, ChatGPT-maker OpenAI and Elon Musk's xAI after Facebook's $14 billion investment

Time of India

a day ago

Google, the largest customer of AI data-labeling firm Scale AI, plans to end its relationship with the company following news that rival Facebook-parent company Meta is acquiring a 49% stake, a report said. Google had reportedly intended to pay
Scale AI
around $200 million this year for human-labeled training data, essential for developing advanced AI models like its ChatGPT competitor, Gemini.
Citing five sources familiar with the matter, news agency Reuters reported that the move stems from concerns that Meta's significant investment could expose Google's proprietary AI research and roadmap to a key competitor. Reportedly, the search giant has already begun discussions with several of Scale AI's rivals this week, looking to shift this substantial workload.
Not only Google, The unease isn't limited to Google. Other major tech companies using Scale AI's services, including Microsoft and Elon Musk's xAI, are also reportedly distancing themselves.
The report also says that OpenAI, another significant AI developer, had already scaled back its engagement with Scale AI months ago, though its spending was considerably less than Google's. However, OpenAI's CFO recently stated that the company would continue working with Scale AI as one of its many data vendors.
Why these companies are scaling back their involvement in Scale AI
The primary concern among companies competing with Meta in cutting-edge AI model development is the risk of their research priorities and technical blueprints being exposed to a direct rival. Customers often share proprietary data and even prototype products with Scale AI's workers for data-labeling services.
With Meta now holding a substantial stake, these AI firms fear their chief competitor could gain sensitive business and technical intelligence.
What it may mean for Scale AI
For Scale AI, this potential loss of Google's business comes as a blow, despite its recent valuation jump to $29 billion following Meta's investment (up from $14 billion pre-deal). Scale AI's core business heavily relies on a few major customers, making it vulnerable to such departures. While Scale AI intends to continue operations, its CEO, Alexandr Wang, along with some employees, are moving to Meta.
The bulk of Scale AI's revenue comes from providing human trainers to annotate complex datasets for generative AI model makers, a service that can cost as much as $100 per annotation for sophisticated examples. Its largest revenue stream is from its partnerships with generative AI model makers.