Google breaks with Scale AI: Metas deal causes uproar in the industry!

Google breaks with Scale AI: Metas deal causes uproar in the industry!

Today, Alphabet, Google's parent company, decided to end its relationship with Scale AI. The move comes amid growing concerns after Meta announced it would acquire 49 percent of startup Scale AI. Scale AI, known for its data labeling services, is a crucial player in the AI ​​data labeling space, and Google had budgeted around $200 million to work with the company in 2023, particularly to support the Gemini AI model.

Meta's entry, valued at $14.3 billion and marking the second largest single investment in the company's history, catapulted Scale AI's valuation to $29 billion. This acquisition led to a crisis of trust and a breakdown of sensitive contracts as Google and other tech giants such as Microsoft, OpenAI and Elon Musk's xAI fear passing on technical secrets and product data to a direct competitor.

Reactions to the meta deal

After Meta's announcement, Google immediately turned to Scale's competitors to outsource sensitive workloads. Scale AI CEO Alexandr Wang, considered one of the youngest self-made billionaires, is moving to Meta to head its new “superintelligence” department. As Wang and several employees move to Meta, uncertainty in the industry has increased. This led to competitors such as Labelbox and Handshake seeing an increase in demand.

Data provided by Scale AI is essential for developing advanced AI models. Customers often hand over sensitive information and prototypes to Scale AI, which increases concerns about privacy and ensuring data security. “Customers will typically generate hundreds of millions in new revenue from churned customers,” noted Labelbox CEO Manu Sharma, who sees the situation as an opportunity to strengthen his business.

Financial aspects and outlook

Despite the current challenges, Scale AI forecasts revenue of around $870 million for 2024, with around $150 million coming from Google alone. The following year, sales are expected to exceed $2 billion. Scale AI works not only with tech companies, but also with the US government and in areas such as autonomous driving and other modern technologies.

To respond to the changes, many AI labs have started setting up internal labeling teams to ensure the security of their data. Scale AI further emphasizes that it strives to work with large companies and governments while taking the protection of customer data seriously. Google, Microsoft and OpenAI did not comment on the developments, while xAI did not comment.