After Meta invested $14.3 billion to acquire a 49% stake in Scale AI, another tech giant, Google, decided to end its partnership with the Alexander Wang-led data-labeling startup. According to sources, the search giant was expected to spend $200 million on Scale AI's services this year to train its advanced artificial intelligence models.
The anticipated breakup represents a significant shift in the competitive landscape for developing AI models. Scale AI has long been a key supplier of human-annotated training data to companies such as Google, Microsoft, OpenAI, and Elon Musk's xAI. However, Meta's investment has raised concerns among competitors about data privacy, conflicts of interest, and the possible leakage of proprietary research.
Scale AI's entire business depends on a handful of large customers; therefore, losing Google is a major blow to the organization. The startup generated $870 million in revenue in 2024, including $150 million from Google last year. Its partnership with Meta could now trigger a wave of customer exits. Microsoft, OpenAI, and xAI are also reportedly scaling back their use or reconsidering their partnerships with Scale AI.
AI labs are understandably concerned about the potential exposure of their data. Many of them provide early versions of the AI models they are developing, along with privately collected data, to Scale for labeling. With Meta's new stake in Scale, these labs now fear that their research strategies could end up in the hands of a competitor.
The concern has opened the door to opportunities for companies like Labelbox, Turing, and Handshake to strengthen their position as independent data annotation platforms. Labelbox, a service focused on improving the quality of data used to train machine learning models, expects a significant surge in revenue, while Handshake says demand has tripled overnight and is expected to grow rapidly.
Scale AI, founded in 2016, provides labeled training data that is essential for machine learning models, especially in generative AI, autonomous driving, and government defense. The company stated that its business remains strong and that it is committed to safeguarding customer data. While Google had been exploring alternative data service providers for over a year, three sources said. However, Meta's recent moves have driven Google to end its partnership with Scale AI.
