Google to cut ties with Scale AI after Meta buys nearly half the company

Google

Alphabet’s Google is planning to end its partnership with Scale AI, after Meta revealed it is buying a 49% stake in the data-labeling startup, sources told Reuters. The move comes as a major shakeup in the AI world, where data — especially human-labeled data — is the fuel that powers everything from chatbots to self-driving cars.

Google had reportedly planned to pay Scale AI around $200 million this year for training data essential for developing Gemini, its answer to OpenAI’s ChatGPT. But with Meta now a major stakeholder, Google sees a risk in continuing the relationship — fearing that its own research priorities and prototype tools could be exposed to a competitor.

And it’s not just Google walking away. Other big clients like Microsoft, Elon Musk’s xAI, and even OpenAI are distancing themselves. Although OpenAI's CFO confirmed they’ll still work with Scale, insiders say their involvement has already been scaled back.

Scale AI, once valued at $14 billion, is now pegged at $29 billion post-Meta deal. The company insists its broader business remains strong, working with both governments and companies across sectors. But much of its revenue — $870 million last year — comes from AI firms needing expert-labeled data. And Google alone spent $150 million with them in 2023.

The reason for the pullback is simple: trust. When AI labs work with data-labeling companies, they often share confidential data, product blueprints, and even internal strategies. With Meta now so closely tied to Scale, rivals fear their secrets could leak — intentionally or not.

Scale’s CEO Alexandr Wang is also set to join Meta and help lead its AI efforts, adding to the concern.

The fallout is giving competitors a huge opportunity. Labelbox and Handshake have already seen a flood of interest from companies seeking alternatives. Some are even choosing to bring data-labeling in-house to keep everything confidential.

As AI becomes more competitive, one thing is clear: staying neutral isn’t just a nice-to-have — it’s a business requirement.