Meta Platforms Inc. is reportedly in advanced discussions for a landmark investment potentially exceeding $10 billion in Scale AI, a prominent artificial intelligence startup specializing in data labeling. This potential deal, if finalized, would represent Meta's largest external AI investment to date and one of the most significant private funding events in the tech industry, signaling a strategic pivot for the social media giant.

Founded in 2016 by CEO Alexandr Wang, Scale AI has become a critical player in the AI ecosystem by providing essential data labeling and curation services that help companies train machine-learning models. Its clientele includes major tech firms like Microsoft and OpenAI, and Meta itself was an existing investor, having participated in a 2024 funding round that valued Scale AI at approximately $14 billion. Scale AI has demonstrated robust growth, with revenues of $870 million in 2024 and projections to more than double to $2 billion in 2025.

This prospective investment marks a notable shift from Meta's traditional reliance on in-house research and open development for its AI advancements. Chief Executive Officer Mark Zuckerberg has declared AI as Meta's top priority, stating the company would spend as much as $65 billion on related projects in 2025 and aims to make its Llama models an industry standard. The move to invest heavily in Scale AI suggests a strategy to accelerate its AI capabilities and compete more aggressively with peers like Microsoft, Amazon, and Alphabet, who have also made substantial investments in AI startups such as OpenAI and Anthropic.

Scale AI's services have evolved significantly. Initially known for labeling images for self-driving car models, the company has shifted its focus towards curating the massive volumes of text data crucial for training large language models (LLMs). Scale AI is increasingly employing highly educated professionals—including PhDs, legal experts, and medical professionals—to develop sophisticated AI systems and guide models through reinforcement learning, particularly for complex, human-level problem-solving in sensitive fields. This adaptation occurs as the industry explores synthetic data while acknowledging the continued need for high-quality, human-annotated data.

Both Meta and Scale AI share an interest in defense technology and are collaborating on a program called "Defense Llama," a version of Meta’s Llama large language model (reportedly based on Llama 3) tailored for military and national security applications. Scale AI has also been deepening its ties with the US government, securing defense contracts and working on AI for defense purposes. CEO Alexandr Wang has advocated before the US Congress for a national AI data strategy to protect America's competitive edge in AI.

Scale AI's journey has included addressing challenges. The company faced criticism regarding its reliance on low-paid contract workers in various countries for data tagging tasks, with some workers reporting psychological distress. However, a recent US Department of Labor investigation into its labor practices was reportedly dropped without penalties, potentially alleviating some concerns for investors.

A successful deal would significantly bolster Meta's AI prowess by providing access to Scale AI's specialized data expertise, crucial for building more advanced and capable AI systems. For Scale AI, it would secure a powerful, deep-pocketed ally, enabling further expansion and development into sectors ranging from enterprise software to defense. This partnership is poised to reshape the competitive landscape of the AI industry, reinforcing the trend of Big Tech consolidating access to talent, data, and computing resources in the race for AI dominance.