Google, Microsoft, Elon Musk's xAI Reportedly Cut Ties With Scale AI After Mark Zuckerberg's Meta Buys Stake

Alphabet Inc.’s GOOGL GOOG Google is planning to end its business relationship with Scale AI after its rival, Mark Zuckerberg‘s Meta Platforms Inc. META, acquired a 49% stake in the AI data-labeling startup.

What Happened: Google, the most significant customer of Scale AI, is reportedly looking to sever ties with the company, Reuters reported. Google was expected to pay Scale AI approximately $200 million this year for human-labeled training data, which is crucial for advancing technologies like its ChatGPT rival, Gemini. However, the tech giant has already initiated discussions with Scale AI’s competitors, signaling a shift in its workload allocation.

The Meta deal, which values Scale AI at $29 billion, has led to significant business loss for the startup. Scale AI’s CEO, Alexandr Wang, is set to join Meta along alongside other employees, while the company plans to continue its operations.

Scale AI, which reported revenues of $870 million in 2024, may face a significant impact due to the loss of key customers, such as Google. Other major tech companies, including Microsoft Corporation MSFT and Elon Musk‘s xAI, are also reportedly distancing themselves from Scale AI.

Google, Microsoft, xAI and Scale AI did not immediately respond to Benzinga’s request for comment.

Why It Matters: The investment by Meta in Scale AI, which valued the company at $29 billion, was one of the largest private funding rounds in tech history. Scale AI plays a crucial role in the AI supply chain, providing high-quality labeled data for AI models.

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The partnership with Meta was seen as a strategic move to accelerate AI development. However, the acquisition has raised concerns about the potential exposure of research priorities and roadmaps to Meta, a chief rival for many AI companies. This has led to key customers like Google and Microsoft distancing themselves from Scale AI, potentially impacting the startup’s business significantly.

Concerns have been raised about the potential exposure of research priorities and roadmaps to Meta, a chief rival for many AI companies, due to the sharing of proprietary data with Scale AI.

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