Tech Giants Freeze Projects Over Meta’s Stake in Scale AI
Major technology companies are stepping back from their collaborations with data labeling startup Scale AI following Meta’s $14.3 billion investment in the company. Just hours after Meta announced its deal on June 12—which includes acquiring 49% of Scale AI and hiring its founder Alexandr Wang—Google reportedly paused several projects, some codenamed “Genesis” and “Beetle Crown.” According to contractors speaking with Business Insider (BI), Google’s partnership with Scale AI had already been winding down. OpenAI and Elon Musk’s xAI also reportedly halted some of their ongoing work with Scale.
Sources within Scale AI expressed concern over the abrupt project freezes. Contractors noted that their project dashboards went blank almost overnight, leaving many without work or clear communication. One contractor, who had been earning $50 an hour, said their assignment supporting Google’s Gemini AI was suddenly shut down the same day Meta Scale AI investment was made public.
While Scale AI insists that it remains an independent company and won’t share confidential data with Meta, trust among existing clients appears to be eroding. A company spokesperson stated that fluctuations in project availability are typical in the business. However, insiders say this disruption feels more significant than usual, particularly given Google’s historical importance to Scale AI, having spent $150 million on its services last year, nearly 20% of the company’s annual revenue.
xAI and OpenAI Follow Suit, Halting AI Labeling Projects
The impact of the Meta Scale AI deal extends beyond Google. Both OpenAI and xAI have paused work with Scale AI, further compounding the company’s uncertain future. One of Scale’s major xAI projects, known as “Xylophone,” was paused shortly after the Meta deal. The project involved helping xAI train its chatbot across diverse subjects. Multiple contractors working on Xylophone told BI that their dashboards showed inactive or suspended tasks, and some were informed that no new work was available in their specialty.
OpenAI has also confirmed that its involvement with Scale AI is tapering off. A spokesperson explained that Scale AI only handled a small portion of OpenAI’s overall data work and that their evolving needs now demand more advanced expertise than Scale currently offers.
Contractors who relied on consistent projects through Scale AI are now facing an uncertain future. Many expressed frustration over a lack of communication and felt that the sudden withdrawal of projects wasn’t handled well. Internal tools revealed that, as recently as April, Scale was managing at least 38 active projects for Google—more than a third of its generative AI contracts.
Investors Pull Out as Scale AI’s Future Becomes Unclear
As major clients pause or end partnerships, investor confidence in Scale AI appears to be wavering. One investor told BI that they are selling off their remaining stake in the company, citing doubt that Meta Scale AI’s backing can make up for the loss of key clients like Google. They questioned the sustainability of Scale AI’s $29 billion valuation in light of shrinking business from major players.
Meanwhile, executives at competing firms report an uptick in inquiries from former Scale AI customers, suggesting that clients are actively seeking alternatives. Although Scale AI’s leadership remains optimistic—stating they have “multiple promising lines of business” and are “unequivocally” independent—market signals suggest the company faces significant reputational and financial challenges.
With Meta Scale AI now holding a substantial share, the startup’s future may hinge on whether it can balance its relationship with a major competitor while regaining the trust of tech giants who are now walking away.
