Jeff Bottari/Getty Images; Kevork Djansezian/Getty Images; Getty Images; Tyler Le/BI

2025-12-10T09:11:01.392Z

This summer, after Meta made a $14 billion investment in Scale AI and poached its 28-year-old founder, Alexandr Wang, and after A-list clients like OpenAI and Google halted work with the startup, a worker for Scale AI anxiously asked ChatGPT what it thought of his company’s fate. He knew the chatbot well, having tested it for vulnerabilities. Its prognosis was grim.

"Scale AI will no longer exist as a credible independent entity within 24 months," ChatGPT, which isn’t any kind of official authority, wrote. "Its infrastructure will be repurposed for Meta’s internal needs. Its client base will evaporate. Its role as a neutral red teamer or external evaluator is effectively over."

The contractor shared the chat logs with fellow workers at Scale AI. In one reply reviewed by Business Insider, one worker said that they were already on their way out, describing the startup as a ticking time bomb.

The chatbot was drawing from a storm of headlines about Scale AI, which until this summer had been touted as one of the most ascendant startups in tech — the place Big Tech companies vying for AI supremacy went to when they wanted their chatbots stress-tested and perfected. Lately, it’s lost some of its gleam, with investors significantly lowering valuations, workers sniping about pay, and rivals coming for its clientele.

The vast army of human data labelers that made Scale AI a juggernaut are chafing at what they say are pay cuts, lengthy unpaid onboarding sessions to join new AI projects, and thinning workloads — and are increasingly leaving the platform altogether, according to interviews with five current and former contractors and internal correspondence obtained by Business Insider.

Activity in the main internal chatroom for Outlier — Scale AI’s flagship gig work platform, which touts more than 100,000 taskers — has plummeted since the Meta investment, with weekly discussion threads drawing dozens instead of the usual hundreds of replies, according to screenshots reviewed by Business Insider.

One tasker said that they’d spent close to 40 hours in a single month in unpaid onboarding sessions without landing any actual work, noting that other platforms like Scale AI’s rival Mercor do pay for this kind of work. Elizabeth Boyd, another tasker, says she rarely does work for Outlier anymore after seeing effective pay rates for some projects slashed to around $20 an hour — down from the $50 she used to make. One gig that advertised $20 an hour only allowed three minutes of working time every two days, or a 99-cent payout, according to screenshots obtained by Business Insider.

Joe Osborne, a Scale AI spokesperson, says the balance sheets show the company is on the right path. "This quarter is on track to be our biggest of 2025, our data business is more profitable today than it was before the Meta deal, and our applications business, which includes work with Fortune 500 companies and governments, has doubled revenue" in the second half of the year compared to the first, Osborne wrote in an email. He also noted there has been an increase in active users on Outlier since the Meta deal, and that pay rates are based on the skills for each project and contributors always see the rates upfront, and have the option of declining any gig.

The company is also looking to diversify. The startup has embraced fields like robotics, announcing a new lab to meet booming demand for robot training data this fall. It’s doubling down on its US military and other government work, winning up to $199 million worth of defense contracts since the Meta deal.

Some investors are bullish. In one current investor’s view, Meta has mostly left Scale alone, letting it operate as an independent company. With around $1 billion on the balance sheet, the investor added, there are no plans to fundraise. And an IPO could still be on the table at some point.

Other investors see Scale AI as more like a gutted fish. The Meta investment — which valued Scale AI at $29 billion — has dented Scale AI’s valuation in private markets where people buy and sell equity from pre-IPO startups. Noel Moldvai, Augment’s CEO, tells Business Insider his platform used to process millions of dollars’ worth of transactions in Scale AI stock before the Meta deal, but that dried up as sellers waited to see if the startup rebounded. Activity is picking up again, he said, but at lower valuations of around $15 billion to $9 billion. The underlying message of Meta’s semi-acquisition is clear to Moldvai. "It seems like Meta was just after Alexandr Wang, and so this is probably the structure that let them get him," he says. He adds that Scale AI’s valuation could still bounce back.

On another marketplace, Caplight, Scale’s valuation has dropped to $7.3 billion. Osborne says that the valuation is not accurate because there have been no sales of stock at that price and multiples of comparable companies would yield a higher valuation.

If the company doesn’t pull it off, it could become the latest example of a once-promising startup that morphed into a "zombie" after being invested in by a tech giant.

---

This summer, Scale AI painted a rosy picture of the Meta investment, describing it as a major cash infusion and source of future work in its official statement at the time of the deal. That messaging was also conveyed to the startup’s corporate workforce, says another former member of Scale AI’s red team, which tests chatbots for flaws and vulnerabilities. Just a few weeks after the investment, he was laid off as part of a major downsizing that saw 14% of Scale AI’s full-time staff of 1,400 let go.

Osborne said the layoffs were aimed at making the data division profitable, which it now is.

Those weren’t the only cuts. In September, Scale AI terminated 12 contractors on its red team, citing performance issues. Two ex-red teamers told Business Insider that the team’s work had been drying up since the Meta deal, blaming thinning workloads for the cuts. Later that month, Scale AI shuttered a team in Dallas of contractors focused on generalist AI work as it moved towards more specialized fields.

Osborne said the 12 contractors were part of Scale’s temporary workforce and represented a small fraction of its overall red team, which the company is still committed to investing in. He said the Dallas cuts were part of an industry shift towards higher skilled work and represent a small fraction of its overall workforce.

Meanwhile, a swarm of AI training startups has rushed in to poach Scale AI’s workers and clients. Some are now raising capital at soaring valuations. Surge AI hit a valuation of $24 billion while Mercor, which is run by three 22-year-olds, announced in October it had raised $350 million at a $10 billion valuation.

Mercor has won at least one major AI training project from Meta, Scale AI’s 49% shareholder. In September, Scale AI filed a lawsuit in California against Mercor alleging it hired one of its sales employees to poach its biggest customers, allegations Mercor denies.

Spam and low quality data became accepted as a cost of doing business.Tammy Hartline, a former Scale AI consultant who now works at Mercor.

One Scale AI investor said he’d been frustrated with Scale AI’s leadership losing customers to Surge AI in particular, which reportedly brought in more revenue than Scale in 2024, despite never having raised outside funding. (Scale AI had raised more than $1.5 billion before the Meta deal.)

Brendan Foody, Mercor’s CEO, has publicly criticized Scale AI for what he claims are low pay rates and data quality issues. "Scale lost the focus on product, on scaling quality," Foody said in a September podcast appearance. In response, a Scale AI spokesperson told Business Insider its quality metrics are at "record highs."

It’s not just rival CEOs making that point. Tammy Hartline, who managed projects for Scale AI as a consultant until the summer of 2025, said Scale grew so quickly that the work became more about needing bodies than skills. "Spam and low quality data became accepted as a cost of doing business," she said. Hartline joined Mercor in September.

Scale AI has also been beset with security issues that predate Meta’s investment. In June, Business Insider reported that Scale AI routinely used public Google Docs to track work for high-profile customers, including Google, Meta, and xAI. That practice left AI training documents labeled "confidential" accessible to anyone with the link and exposed reams of personal information, like private emails and pay details, about contractors. "We take data security seriously," Osborne said. "We conducted a thorough investigation and disabled any user’s ability to publicly share documents from Scale managed systems."

Sloppy security isn’t uncommon in the AI training space — Surge AI similarly left open sensitive work for its client Anthropic. But the exposed documents seen by Business Insider show that for a project for Google, Scale AI faced security and quality issues throughout 2023 and 2024. Thousands of taskers were flagged for being "suspected spammers," "cheaters," with hundreds of workers listed in spreadsheets with titles like "Good and Bad Folks" and "suspicious non-US taskers." Meta recently removed more than 40 groups buying and reselling AI training accounts, including from Scale AI, in response to a recent Business Insider investigation. Osborne said Scale’s data quality metrics are the highest they’ve ever been.

The company has notched some recent wins. It once appeared bogged down by litigation, but recently agreed to settle multiple lawsuits filed by ex-workers in California who alleged they were underpaid and misclassified as contractors. (Scale no longer accepts gig workers from the state.) The big question remains whether Scale AI can thrive in the increasingly competitive AI training industry it helped give birth to. For many former workers, it’ll be too late to find out.

---

Charles Rollet* is Business Insider’s tech correspondent in San Francisco. Ben Bergman is a senior correspondent at Business Insider, where he investigates the tech industry with a focus on venture capital and startups.*

Business Insider’s Discourse stories provide perspectives on the day’s most pressing issues, informed by analysis, reporting, and expertise.

• Meta
• Discourse
• Mark Zuckerberg
• More

Most popular

Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know

Business Insider tells the innovative stories you want to know