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Alphabet’s Google (NASDAQ:GOOGL) is cutting ties with Scale AI following Meta’s (NASDAQ:META) acquisition of a 49% stake in the data-labeling startup, according to five Reuters sources. Google had planned to pay Scale AI about $200 million in 2025 for human-labeled training data to develop AI models like Gemini, its ChatGPT rival. Now, it is seeking alternative providers to avoid potential exposure of proprietary data to Meta.
The Meta deal values Scale AI at $29 billion, up from $14 billion, and will see CEO Alexandr Wang and some staff join Meta’s AI division. While Scale AI claims its business remains strong across government and enterprise clients, losing top AI firms could be a major setback. The company earned $870 million in 2024, with Google alone contributing $150 million.
Other key clients like Microsoft (NASDAQ:MSFT), OpenAI, and Elon Musk’s xAI are also distancing themselves. While OpenAI confirmed it still uses Scale AI, it has scaled back usage significantly. Competitors worry Meta could gain insight into their product roadmaps and sensitive research through Scale’s data-labeling services.
This development has opened the door for competitors like Labelbox, Turing, Handshake, and Mercor to capitalize on the shift. Labelbox expects hundreds of millions in new revenue, and Handshake reported a tripling of demand. Some AI labs are now building in-house labeling teams to retain control and ensure data security.
Scale AI, founded in 2016, became a key partner in AI model training. However, neutrality has become a priority for leading AI labs. As Meta pushes deeper into AI to catch up with rivals, this deal could reshape the competitive landscape—and create opportunities for emerging players in the AI data ecosystem.
