OpenAI, the owner of ChatGPT, is reportedly halting its partnership with data-labelling startup Scale AI. This development comes shortly after Meta Platforms Inc. made a significant investment in Scale AI, acquiring a 49% stake worth $14.3 billion, and hiring its co-founder and CEO, Alexandr Wang, along with some employees. While Scale AI previously held a small fraction of OpenAI’s overall data needs, OpenAI had already been reducing its reliance on Scale before the Meta deal, actively seeking other AI providers for more specialized data to support its advanced artificial intelligence models. OpenAI had initially stated it would continue working with Scale AI as one of many vendors, but recent reports indicate a halt in the partnership.

Meta's substantial investment has reportedly raised Scale AI's valuation to $29 billion, up from nearly $14 billion in a May 2024 funding round that included Nvidia and Amazon. As part of the deal, Alexandr Wang will play a prominent role in Meta's artificial intelligence strategy. This move has sparked concerns among experts, who warned that the partnership with Meta, a direct rival in AI advancement, could negatively impact Scale AI's reputation. Rival AI labs, including OpenAI and Google, reportedly worried that Meta could gain an inside track into their data priorities, especially with Wang retaining a seat on Scale’s board.

The concern among companies competing with Meta in developing cutting-edge AI models is that doing business with Scale AI could expose their research blueprints to a competitor. Customers collaborating with Scale AI often share proprietary data and prototype products for data-labelling services. With Meta now holding a 49% stake, AI companies fear that one of their chief rivals could obtain knowledge about their business strategies and technical blueprints. Alexandr Wang, recognized as one of Silicon Valley’s promising entrepreneurs with connections to top tech executives like OpenAI CEO Sam Altman and the federal government, announced his departure from Scale AI as CEO, stating it came at a cost despite being a significant personal win.

This situation also spells trouble for Scale AI, the startup Wang co-founded in 2016. Google, which was Scale AI's largest customer, also revealed plans to cut ties. Google had intended to pay Scale AI approximately $200 million this year for human-labelled training data crucial for developing technologies like its Gemini AI models, a competitor to ChatGPT. Reports indicated that Scale AI generated $870 million in revenue in 2024, largely attributed to Google’s $150 million investment in its services. Following the planned exits of Google and OpenAI, other major tech companies and Scale AI customers, including Elon Musk's xAI and Microsoft, are reportedly considering similar actions. Amidst these developments, a Scale AI spokesperson affirmed that its business, which includes work with major companies and governments, remains strong and committed to protecting customer data.