Meta’s decision to invest nearly $14.3 billion for a 49 percent stake in Scale AI is causing concern among some of the startup’s biggest clients. Google, reportedly the largest of these clients, had planned to spend around $200 million this year on Scale’s services. However, following Meta’s deal, Google is now reconsidering the partnership and holding talks with rival data-labelling providers. Microsoft is also said to be pulling back, and OpenAI has already reduced its reliance on Scale. The key issue appears to be trust; clients are wary of sharing sensitive data with a company now partly owned by a direct competitor.
Scale AI has built its business by supplying highly annotated data to train artificial intelligence systems for clients ranging from self-driving car companies to major tech firms and government agencies. In 2023 alone, it reportedly earned nearly $870 million, with Google contributing a substantial share of this revenue. These services are critical for AI development, especially in fields like generative language models, where high-quality training data is essential.
With Meta now a major stakeholder, rival firms fear their data could indirectly benefit Meta’s AI ambitions. This has prompted companies to explore alternatives. Competitors like Labelbox, Handshake, and Mercor have reported sharp increases in demand, with some seeing client interest triple in a matter of days. At the same time, many AI labs are shifting to in-house labelling teams, hoping to protect proprietary information and reduce exposure to external risks.
Despite the backlash, Scale insists that its business remains strong and that it continues to operate independently. The company says it will maintain strict data protection policies to ensure client trust. Alexandr Wang, Scale’s co-founder and now a Meta executive, will still serve on the board, suggesting some continued link between the two firms.
This moment highlights how delicate the AI supply chain has become. As AI development becomes more strategic, control over training data is gaining new importance. Meta’s investment in Scale may signal the start of a broader industry shift, one where partnerships are scrutinised not just for performance, but for competitive alignment and long-term data security.
