Facebook-owner Meta (META.O), opens new tab has invested in Scale AI in a deal that values the data-labeling startup at $29 billion and brings in its 28-year-old CEO, Alexandr Wang, to play a prominent role in the tech giant's artificial intelligence strategy.
Meta will take a 49% stake for $14.3 billion, according to two sources familiar with the matter.
"We will deepen the work we do together producing data for AI models and Alexandr Wang will join Meta to work on our superintelligence efforts," Meta said in a statement that did not disclose financial terms.
The main driver for Meta's substantial investment in Scale was to secure Wang to lead its new superintelligence unit, according to a separate source briefed on the discussions.
The sources were not authorised to speak to media and declined to be identified. Meta didn't immediately respond to a request for comment.
Wang, who was born in Los Alamos, New Mexico, to Chinese immigrant physicists, dropped out of MIT to co-found Scale. He was quickly lauded as one of Silicon Valley's most promising entrepreneurs, raising funding from blue-chip venture capital firms and achieving billionaire status in his 20s.
He has also cultivated relationships with top tech executives such as OpenAI CEO Sam Altman and has since leveraged his influence to build connections in Washington D.C., testifying in front of Congress and securing the federal government as a big client.
Meta, once recognized as a leader in open-source AI models, has suffered from staff departures and has postponed the launches of new open-source AI models that could rival competitors like Google (GOOGL.O), opens new tab, OpenAI, and China's DeepSeek.
By poaching Wang, who does not come from a research background but has built a major AI business, Meta CEO Mark Zuckerberg is betting that Meta's AI efforts can be turned around by an adept business leader more in the mold of Altman than the research scientists at the helm of most competing labs.
Scale said the deal values it at $29 billion and that its chief strategy officer, Jason Droege, will serve as its interim CEO.
The social media giant doesn't plan to take a board seat in Scale, one of the sources added.
A few employees from Scale, a company with 1,500 people, will join Wang in moving to Meta, Wang said in a note to employees on Thursday. Wang will remain on Scale's board.
The cash investment would rank as Meta's second-largest ever after its $19 billion buyout of WhatsApp.
It's unclear if this deal will come under any regulatory scrutiny. Meta has been sued by the U.S. Federal Trade Commission, which alleges it illegally acquired Instagram and WhatsApp to stifle competition.
Founded in 2016, Scale provides vast amounts of accurately labeled data, which is pivotal for training sophisticated tools like OpenAI's ChatGPT. To do so, Scale set up subsidiary platforms such as Remotasks and Outlier to recruit and manage gig workers who manually label the data.
It was valued at nearly $14 billion in a May 2024 funding round that included Nvidia (NVDA.O), opens new tab, Amazon (AMZN.O), opens new tab and Meta among its backers.
Despite the large investment sum, the deal might not be all good for Scale.
Many AI labs that are clients of Scale could decide to discontinue using its services if they were to worry, that since Wang still sits on Scale's board, Meta might obtain an inside track into rivals' priorities around data.
Still, the deal is a win for early venture capital investors in Scale, such as Accel and Index Ventures, who can cash out half of their stake in the startup.
