Scale AI cuts 200 employees on the heels of Meta investment

AI data-labeling company Scale AI is laying off 200 employees, following a dramatic month with Meta.

Scale AI is cutting 14 percent of its workforce, and will also end work with 500 global contractors, Bloomberg reported. This comes after Scale AI received $14.3 billion of investment from Meta and simultaneously lost its CEO Alexandr Wang to Meta's superintelligence group as part of the deal.

According to an internal memo from Scale AI's interim CEO Jason Droege viewed by Bloomberg, the layoffs are due to its data labeling business scaling too quickly, which led to bureaucracy and "unhelpful confusion about the team’s mission." The memo also cited "shifts in market demand."

Meta's poaching of top AI talent to gain a competitive edge over its rivals has had a strong orbital effect over the AI industry, including pulling Scale AI under its influence. Meta's investment in Scale AI gives it a 49 percent stake in the company, which has reportedly caused OpenAI and Google cut ties with the data-labeling company due to competing interests. Scale AI is known for labeling and annotating training data, which is a crucial part of developing AI models. Scale AI and OpenAI previously had a longstanding relationship, which goes back to when Wang and OpenAI CEO Sam Altman were roommates during the height of the COVID-19 pandemic.

Mark Zuckerberg was reportedly disappointed with Meta's Llama models, which prompted him to personally recruit top AI leaders and researchers for an ambitious project to develop AI superintelligence. Employees from OpenAI, Anthropic, Google, and Apple have left to join Meta's new team, shaking up the entire industry.

A Scale AI spokesperson told Bloomberg that the company's layoffs are part of a restructuring to focus on enterprise and government contracts. The company plans to hire hundreds of people later this year for these efforts.

Disclosure: Ziff Davis, Mashable’s parent company, in April filed a lawsuit against OpenAI, alleging it infringed Ziff Davis copyrights in training and operating its AI systems.