Charles Esther
Scale AI’s recent $14.3 billion investment deal with Meta is shaking up the artificial intelligence industry.
Just hours after the announcement, Google, OpenAI, and Elon Musk’s xAI began pausing or ending projects with the data-labeling startup.
These rapid decisions signal serious concerns about Meta’s influence over Scale AI, despite claims of the company’s continued independence.
Ten contractors told Business Insider that major clients have either frozen work or reduced project volume following Meta’s 49% stake acquisition in Scale AI.
The timing and scale of the pullbacks suggest that rival companies are concerned about their data security and competition.
Google Pauses Multiple Projects Over Confidentiality Fears
Google was reportedly Scale AI’s largest client in 2023, spending $150 million.
However, after the Meta deal was announced on June 12, contractors working on several Google projects received emails stating that their assignments were being paused.
Projects with codenames like “Genesis” and “Beetle Crown” were halted without clear explanations.
Some contractors, earning $50 an hour, were told their work had ended the same day the deal was publicized.
Internal dashboards reviewed by Business Insider showed that Scale once ran over 38 active projects for Google alone.
Now, most of those projects appear inactive, and contractors say new assignments are nearly nonexistent.
OpenAI and xAI Join the Wave of Project Pauses
The fallout is not limited to Google.
OpenAI confirmed to Business Insider that it has been winding down its work with Scale AI.
One contractor working on an OpenAI project said the team was suddenly informed their work would no longer continue.
They were not given a specific reason, but they believe the Meta investment is the likely cause.
xAI’s collaboration with Scale AI also appears to be affected.
A project called “Xylophone,” designed to improve xAI’s chatbot across a variety of complex topics, has seen multiple pauses.
Several contractors said their dashboards now show inactive projects, leaving them uncertain about their future workload.
Scale AI Maintains It Is Still Independent
In response to concerns, Scale AI’s interim CEO Jason Droege stated in a blog post that the company remains “unequivocally” independent.
He also assured customers that Meta would not have access to any confidential client data.
A spokesperson for Scale emphasized that pauses in project activity are normal in the data labeling business.
However, the timing and magnitude of these pullbacks suggest a deeper shift in industry trust.
Investors and Rivals Express Doubts
One smaller investor in Scale AI told Business Insider they were selling their remaining stake.
They argued that Meta’s involvement won’t be enough to compensate for the loss of Google and other key clients.
Executives at rival firms also reported a surge in inquiries from companies that had previously worked with Scale.
These shifts hint at a possible realignment in the competitive landscape of AI data services.
Questions are now being raised about whether Scale can maintain its current $29 billion valuation.
Future Uncertain as Big Tech Realigns AI Partnerships
The consequences of Meta’s investment in Scale AI are becoming clearer by the day.
What was intended to be a strategic growth move has instead sparked fear and fragmentation across the AI sector.
With clients like Google, OpenAI, and xAI pausing work, Scale faces the challenge of proving it can remain neutral and trustworthy.
Meanwhile, rival firms are positioning themselves to scoop up displaced business and talent.
The coming months will reveal whether Scale’s partnership with Meta was a game-changing move or a strategic misstep.
