Scale AI Cuts 14% Workforce After Meta's $150B Investment

In the wake of Meta's substantial investment of nearly 150 billion dollars in Scale AI, a leading AI data annotation company, and the high-profile hiring of its founder and CEO, the company has announced significant layoffs. Scale AI has decided to reduce its workforce by 200 full-time employees, which constitutes 14% of its total staff. This move comes as a strategic adjustment following Meta's aggressive investment and hiring spree in the AI sector.

Meta, the parent company of Facebook and Instagram, has been aggressively investing in AI technologies this year. The company has been actively pursuing major acquisitions and poaching top talent from competitors such as Alphabet and OpenAI to form a "super intelligence team." This aggressive strategy mirrors Meta's earlier approach of acquiring Instagram and WhatsApp to dominate the social media landscape, a move that has proven successful in the past.

The temporary CEO of Scale AI, Jason Droege, acknowledged in a memo to employees that the company had expanded too rapidly in its generative AI business, leading to an overly bureaucratic structure. Despite this, Droege assured that Scale AI remains well-funded and has a strong talent pool. The layoffs are intended to make the company more agile and better equipped to respond to market demands and client needs. Droege also highlighted that Scale AI plans to significantly increase its workforce in AI application business units, covering enterprise, government, and international public sectors, in the second half of the year.

Scale AI, founded in 2016, is renowned for providing data annotation services to major tech companies like OpenAI, Google, and Microsoft. However, following Meta's significant investment, key competitors have begun to reduce their reliance on Scale AI. OpenAI, for instance, has announced plans to gradually phase out its collaboration with Scale AI, although Scale AI only represents a small portion of OpenAI's data annotation contracts. This shift underscores the new challenges Scale AI faces post-Meta's investment.

The substantial investment by Meta has sparked increased interest and demand from major clients in the cloud computing and AI sectors for alternative data annotation service providers. Companies like Labelbox and Turing are seeing a surge in demand for their data labeling services as clients reassess their dependence on Scale AI. Prior to the layoffs, Scale AI had approximately 1,400 employees globally. The company has stated that affected employees will receive severance packages, and it will also end contracts with 500 contract workers worldwide.

Meta is currently in the midst of a massive AI hiring spree, aiming to compete more effectively with rivals like OpenAI. Following the acquisition of 49% of Scale AI's shares for nearly 150 billion dollars, Meta's CEO personally recruited Scale AI's CEO to lead the company's new Superintelligence Labs. A portion of Scale AI's employees have already joined Meta. Recently, Meta acquired PlayAI, a small AI startup focused on voice technology, further bolstering its AI ambitions. Meta is investing approximately 650 billion dollars in AI infrastructure, including server clusters and high-performance networking systems, and is actively recruiting top global talent to build the world's most advanced AI models and applications.