Scale AI Cuts 14% of Staff After Meta’s $14.3 Billion Investment

Scale AI, the San Francisco-based company known for providing critical data labeling and training services to leading artificial intelligence firms, has announced layoffs affecting approximately 14% of its workforce. This move translates to around 200 full-time employees and an additional 500 contractors, marking a significant reduction just weeks after Meta’s $14.3 billion investment that acquired a 49% stake in Scale AI. The investment included the high-profile hiring of founder Alexandr Wang as Meta’s Chief AI Officer.

The layoffs primarily impact Scale’s data-labeling division, which handles the labor-intensive task of preparing datasets for AI models developed by industry giants such as OpenAI, Google, and Microsoft. Interim CEO Jason Droege explained in an internal memo that the company grew too rapidly, resulting in “too many layers, excessive bureaucracy, and unhelpful confusion” within teams. Scale expanded aggressively during the recent surge in generative AI enthusiasm, but shifting market demands and client concerns have prompted a reassessment.

Several major customers have reduced or halted projects with Scale following Meta’s investment. Google has paused some of its initiatives, and OpenAI has scaled back engagements amid fears about intellectual property risks due to Meta’s stake. Meta’s dual role as both investor and competitor has created a complex dynamic, undermining some clients’ confidence in Scale’s neutrality and ability to safeguard sensitive information.

The layoffs have disproportionately affected contractors working overseas in countries such as Kenya, the Philippines, and Venezuela, many of whom were abruptly disconnected from company systems. Full-time employees in the United States and within generative AI teams have also faced job terminations. While affected workers will continue to receive pay through mid-September, those accepting severance packages are required to agree to company terms restricting further claims.

The fallout extends beyond workforce reductions. Following Wang’s departure to Meta, several other key leaders and researchers have left Scale, contributing to internal instability. Competing companies are reportedly seeking to enlist displaced employees, reflecting the broader turbulence in the AI services sector.

Despite the disruption, Droege says Scale remains financially stable and aims to focus on government, enterprise, and international markets going forward. The company is expected to scale back its data-labeling operation as it restructures, hoping to restore client trust and redefine its role in an evolving industry.