TheChek News Flow

Unusual structure will send the cash to Scale’s investors and boost Meta’s lagging artificial intelligence efforts

Meta has agreed to take a 49% stake in data labeling firm Scale AI for $14.8 billion, two people familiar with the matter said. The unusual deal will be structured so Meta will send the cash to Scale’s existing shareholders and place the startup’s CEO, Alexandr Wang, in a top position inside Meta, the people said.

The deal, which hasn’t yet been finalized, appears to be a rich one for Scale’s shareholders, with big paydays for some of Scale’s biggest investors such as Accel, Index Ventures, Founders Fund and Greenoaks Capital, as well as current and former employees. Scale shareholders also would maintain their existing holdings in Scale, which will now be valued at $28 billion, including the cash invested, up from $13.8 billion last year.

Meta would put Wang in charge of a new “superintelligence” lab, along with other top Scale technical employees, the New York Times and Bloomberg reported Tuesday morning. That will put Wang, 28, in competition with some of his customers and friends, including OpenAI CEO Sam Altman. The deal likely would further enrich Wang, who became the youngest self-made billionaire in the U.S. several years ago. (For more on Wang’s rise in Silicon Valley, read our feature from last year.)

Meta CEO Mark Zuckerberg has been actively recruiting top AI researchers in an effort to boost his company’s AI efforts. He was frustrated with the reaction to its latest AI offering, Llama 4 and aims to catch up to competitors such as Google and OpenAI. Meta is restructuring its AI operations after losing some top executives to rivals.

Scale faces important questions following the deal. It removes Wang from the day to day of the company he founded in 2016 to provide human-labeling services to clean up data to be used by emerging AI companies focused on self-driving cars. Jason Droege, a former Uber Eats executive who became Scale’s chief strategy officer last fall, has been in discussions to become Scale’s new CEO, one of the people said.

What happens with Scale’s existing customer base is another question. One of Scale’s largest existing customers is Alphabet, one of the people said. The startup told investors early last year its customers also include Microsoft, Amazon, Nvidia and OpenAI. “Scale has been a long-term partner of OpenAI, and is at the forefront of building the largest-scale foundation models,” the company wrote in an investor presentation last spring.

Meta is also a significant customer and plans to increase their spending on Scale for data labeling services as part of the deal, one of the people said.

Meta, with abundant cashflow, could have bought Scale. But the company is coming off a painful trial in which regulators sought to show the company’s acquisitions of Instagram and WhatsApp were anticompetitive. The unusual structure of the deal, and the fact Meta will own just 49% of Scale, could be an effort to avoid more regulatory scrutiny.

The startup, last valued at $13.8 billion in a funding round last spring, has grown rapidly by selling labeling services to large AI companies like Alphabet, Meta and OpenAI. Scale generated about $870 million in revenue last year and expected more than $2 billion this year, The Information previously reported. It also lost about $150 million, before accounting for interest, taxes, depreciation and amortization.

There have been some signs of the company struggling to meet expectations, however, including missing sales and profit goals it set with investors last year, The Information previously reported. Some big AI developers are starting to bring the type of work Scale does in house.

The company had more than $900 million of cash on its balance sheet at the end of last year, according to financial information shared with prospective investors. Since Scale’s founding in 2016, it has raised more than $1.5 billion from investors. Some of its earliest backers include Y Combinator, Accel and Outlander, and it’s also raised from firms such as Thrive Capital, Coatue Management, Dragoneer and Tiger Global.