Google is ending its relationship with Scale AI, a move that signals growing tensions in the AI industry following Meta's massive investment in the data-labeling startup.
According to multiple sources, Google had planned to spend around $200 million this year on Scale AI's specialized data-labeling services, which are crucial for training sophisticated AI models like Google's Gemini. The search giant has already initiated conversations with several of Scale's competitors to shift its workload elsewhere.
The exodus comes after Meta finalized a $14.3 billion deal for a 49% stake in Scale AI, valuing the company at $29 billion - more than double its previous valuation of $13.8 billion from a May 2024 funding round. As part of the arrangement, Scale AI's 28-year-old CEO Alexandr Wang will join Meta to lead its new "superintelligence" efforts while maintaining a position on Scale's board.
Other major tech companies are following Google's lead. Microsoft is reportedly looking to reduce its reliance on Scale AI, while Elon Musk's xAI is also seeking to exit its relationship with the company. OpenAI had already begun pulling back from Scale several months ago, though its CFO Sarah Friar stated they will continue working with Scale as one of many vendors.
The primary concern for these companies centers on data security and competitive intelligence. When contracting with Scale AI, customers often share proprietary data and prototype products that require annotation. With Meta now holding a significant stake in Scale, competitors fear their research priorities and technical roadmaps could be exposed to a direct rival.
Scale AI, which generated approximately $870 million in revenue in 2024 and expects to exceed $2 billion this year, maintains that its business remains strong across major companies and governments. The company has emphasized it will continue operating independently while safeguarding customer data, but the loss of Google - its largest client - represents a significant challenge as it navigates its new relationship with Meta.