After all the talk about AI’s godlike powers, it turns out that they still run on people, and now that critical human feedback has become Big Tech’s newest battleground,
Ironically, since ChatGPT took off in late 2022, artificial intelligence has consistently needed humans to improve. It’s essentially the layers of human feedback that help train AI to evolve and make smarter, safer, more useful choices.
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In true tech fashion, though, AI’s human-in-the-loop (HITL) pipelines are turning into a slugfest. At the heart of this showdown is Scale AI, perhaps one of the leading names in the niche.
However, that premium position is now under duress with two of the biggest tech giants, Google and Meta Platforms (META) , at the center of it all.
In the latest twist, Google is stepping back while Meta ramps up its role with Scale AI, with the broader narrative of Big Tech guarding its training data like gold.
Sundar Pichai, chief executive officer of Alphabet Inc., may be hunting for a new human-in-the-loop service provider after Meta makes a multibillion-dollar move.
Scale AI’s rise as the linchpin of human-in-the-loop pipelines
Since its founding in 2016, Scale AI has become one of the key players in fine-tuning the most advanced AI models. Specifically, it delivers the high-fidelity labels needed for reinforcement learning from human feedback (RLHF).
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Simply put, it’s how humans guide AI by giving feedback so it learns to make better choices.
AI bellwethers like OpenAI and Google (GOOGL) have leaned on these human-verified datasets, a role OpenAI’s CFO Sarah Friar recently deemed “critical” in maintaining a healthy AI ecosystem.
Naturally, investors took notice.
A $100 million boost from Founders Fund in 2019 helped Scale jump past billion-dollar unicorn status. From there, it was off to the races as by 2021, a $325 million Series E had the company valued at a whopping $7.3 billion.
Things kicked up a gear in May last year when Accel led a $1 billion round, pushing Scale’s valuation to an eye-watering $13.8 billion with Tiger Global, Index Ventures, and Nvidia all back for more.
Now, Meta Platforms, one of the largest spenders on AI, has acquired a 49% stake in Scale AI for $14.3 billion, valuing the company at nearly $30 billion.
The decision risks Scale’s once-enviable positioning by questioning its neutrality, though, with Google, Microsoft, and others retooling their contracts to avoid giving a rival a peek at their playbooks.
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Meanwhile, fresh contenders are muscling in.
Labelbox and Appen have supercharged their platforms, and leaner outfits like Hive, Alegion, and CloudFactory pitch specialized, sector-focused labeling services with tighter security and more agility.
Google’s $200 million-plus exit from Scale AI
In a major development, Google, one of Scale AI’s biggest backers, is looking to offload its $200 million-plus data annotation agreement with Scale AI.
The search giant fears that handing proprietary training datasets to a part-owned rival could leak sensitive insights into its AI offerings, including autonomous-vehicle roadmaps.
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Sources say Alphabet has already opened back-channel talks with Labelbox, Appen, and other annotation outfits to backfill its HITL needs. Those discussions, spanning tens of millions in annual spend, signal a shift toward diversification and tighter controls.
The fallout isn’t limited to Google, though. Microsoft, Elon Musk’s xAI, and other marquee Scale clients are reportedly reevaluating contracts worth hundreds of millions, worried that Meta’s inside view could tilt the competitive landscape.
OpenAI pulled back from Scale months ago, and it spends far less than Google. It spreads its bets across multiple providers to avoid risking its intellectual property.
Turns out, the deal has everything to do with fueling Meta’s “superintelligence” push.
Scale CEO Alexandr Wang will lead the charge toward Meta’s elusive goal of AGI. He’s taking a small crew with him. Scale will continue to run independently with Jason Droege stepping in as interim CEO..
It’s important to note that Google-parent Alphabet’s stock price is up 10% over the past month, yet remains down 7% year-to-date. In contrast, Meta Platform’s stock price has climbed 7.5% in the last month and is up 20.4% YTD.
