Scale AI, the data-labelling startup that received a $14.3 billion investment from Meta last month, has laid off approximately 200 full-time employees, which is the equivalent of 14% of its workforce, and 500 contractors.
While interim CEO Jason Droege cites demand changes, the company has reportedly been losing customers since it buddied up with Mark Zuckerberg’s social media empire.
An email from Droege, obtained by Business Insider, was circulated among employees in Scale AI’s generative AI team on Wednesday morning, informing them that “some members” would be leaving that day. It requested that they not enter the office and announced that impacted employees would have their badges and IT access removed before 8:00 a.m.
The letter stated that Scale AI will “restructure several parts of the GenAI organization,” which focuses on annotating training data for chatbots such as Google’s Gemini and xAI’s Grok.
A separate email, sent to all employees and viewed by The Verge, said the GenAI team will be organised into five pods from now on, down from 16, and attributed the restructuring to “shifts in market demand” after it “ramped up (its) GenAI capacity too quickly.”
Scale AI has been losing customers
Over the past few weeks, reports have emerged that companies such as OpenAI and Google are terminating their partnerships with Scale AI.
OpenAI denied that the decision was related to any risk of Meta accessing its trade secrets following its acquisition of a 49% stake in Scale AI. Brendan Foody, chief executive officer of Mercor and a competitor to Scale, told Forbes that his company is “already seeing a huge influx of demand from customers that are phasing out of Scale AI.”
But Scale AI’s closer relationship with Meta may not be the only reason its customers are turning their backs. Last month, the startup left private emails and confidential AI training materials for Meta, Google, and xAI openly accessible through unsecured Google Docs. Some files were even editable, revealing an alarming lapse in basic data protection.
Nevertheless, Scale AI spokesperson Joe Osborne told BI that the restructuring is intended to help the company move faster and deliver better products to GenAI customers, adding that it remains well-funded and continues to hire across multiple areas.
Scale AI and Meta’s new close relationship
Zuckerberg has built a new AI research division, dubbed Meta Superintelligence Labs, aimed at making his social-focused company a more serious competitor in the AI race. The CEO was reportedly offering $100 million signing bonuses to persuade engineers to jump ship from rivals like OpenAI and Google DeepMind.
Meta Superintelligence Labs will be led by Alexandr Wang, the 28-year-old co-founder of Scale AI who joined Meta after its investment.
“I consider him to be the most impressive founder of his generation,” Zuckerberg said in the memo announcing the partnership.
While Wang is the Chief AI Officer, he leads alongside former GitHub CEO Nat Friedman, who will work mainly on AI products and applied research. Rumour has it that Zuckerberg also secured Apple’s top AI executive, Ruoming Pang, with a compensation package worth over $200 million.
Meta could change the company culture
It’s not only customers that are ditching Scale AI, as several VPs, chiefs of staff, and researchers have left the company since the Meta announcement, according to BI.
Facebook’s parent company doesn’t have a stellar reputation when it comes to culture or ethics. In January, Zuckerberg revealed that he would be firing 5% of Meta’s “low-performers” and replacing them, according to Bloomberg.
Meta was also one of the tech companies that eliminated its diversity, equity, and inclusion programmes after US President Donald Trump banned federal contractors, which include many tech firms, from having them.
Layoffs are rife in the tech industry
This year alone, TechRepublic has reported on layoffs at Amazon, Salesforce, Microsoft (twice), and Duolingo.
Restructuring and workforce reductions have become a defining trend in tech since the post-pandemic reset, when companies that aggressively hired to meet soaring demand for digital services during lockdowns suddenly found themselves overstaffed. In 2022, more than 100,000 jobs were cut across giants like Google, Meta, and Amazon.
Now, AI is also playing a part. Since OpenAI’s ChatGPT burst into the public consciousness at the end of 2022, companies have been racing to adopt AI to boost productivity and avoid falling behind. This shift has led to more aggressive performance expectations, soaring individual output targets, and, in some cases, the replacement of human roles with AI systems.
Curious why Meta tapped Alexandr Wang and tightened its ties with Scale AI? It’s all part of Zuckerberg’s plan to build personal sueprintelligence.
