Meta’s recent $14.3 billion investment in Scale AI—a major data-labeling startup—has sent shockwaves through the artificial intelligence world, triggering a cascade of paused projects, disgruntled contractors, and one investor exiting the company altogether.
The deal, which gives Meta a 49% stake in Scale AI and brings its high-profile founder Alexandr Wang into the social media giant’s AI leadership orbit, has raised serious concerns among Scale’s existing clients, particularly Meta’s competitors. Within hours of the announcement, Google abruptly halted multiple projects with Scale, and both OpenAI and Elon Musk’s xAI followed suit.
Google and Others Hit the Brakes
According to internal messages obtained by Business Insider, Google stopped work on several projects—codenamed “Genesis” and “Beetle Crown”—just hours after the Meta investment was announced on June 12. Contractors working on those initiatives said they were given no advance warning, and the sudden disappearance of group chats and assignments left them scrambling.
“I was earning $50 an hour working on complex prompts for Gemini. Then it was just gone,” said one U.S.-based contractor. “No warning. No transition. Just—boom—cut off.”
Google’s retreat appears to be part of a broader strategy to avoid any potential data leaks now that Meta, a direct rival, is closely involved with Scale. Although Scale has insisted that it will not share any confidential client data and remains an independent company, the optics of the deal are raising red flags across the industry.
A spokesperson for Google declined to comment, while OpenAI confirmed it is winding down its relationship with Scale, citing a shift in technical needs.
Contractors Feel the Squeeze
Ten current and former Scale AI contractors told Business Insider that work has dried up significantly since the Meta deal. Some dashboards that used to display multiple project opportunities now show nothing at all.
“Work has been extremely scarce for most of us,” said another contractor. “And now it may have dried up almost completely.”
One contractor who had been working on xAI’s “Xylophone” project—a large-scale initiative to train chatbots using roleplay data—said nearly all of their assignments were paused immediately following the Meta announcement.
“I was basically told, ‘There’s nothing for your role or location right now,’” the contractor shared.
Big Clients Are Pulling Back
Google was reportedly Scale’s largest customer in 2024, spending an estimated $150 million—nearly 20% of the startup’s total revenue. Losing such a key client is a major financial blow, and there are signs other tech giants may follow. A confidential dashboard reviewed by Business Insider showed Google had over 38 active projects with Scale earlier this year, representing more than a third of all Scale’s generative AI assignments.
Microsoft, Amazon, and Apple—also listed as clients on the internal dashboard—declined or failed to comment on whether they plan to continue working with Scale.
OpenAI, for its part, said Scale only accounted for a small portion of its data work and that it now requires more advanced services than Scale provides.
Investor Jumps Ship
At least one smaller investor is pulling out. The unnamed backer told Business Insider they are selling their remaining shares in Scale because they believe the Meta deal puts too much pressure on the startup’s core business model.
“I don’t understand how Scale AI can be worth $29 billion when the biggest customers are walking away,” the investor said.
The impact could be long-term. One rival AI firm told Business Insider it has already seen a jump in inquiries from former Scale clients seeking alternatives.
Scale AI Responds
In a public blog post, interim CEO Jason Droege emphasized that Scale remains “unequivocally independent” and continues to pursue multiple business avenues. A company spokesperson also pointed out that project fluctuations are normal in the data-labeling industry and that current slowdowns do not reflect a breakdown in client relationships.
Still, for many contractors and stakeholders, the timing is hard to ignore. With big tech distancing themselves and Meta now deeply embedded in Scale’s operations, the company faces a steep challenge to reassure the industry that it can serve competitors with neutrality—and retain their business.
As the dust settles, one thing is clear: Meta’s AI ambitions are reshaping not just its own roadmap, but the entire data ecosystem around it.