Meta-Backed Scale AI Cuts 14% of Its Workforce

Business Insider

a day ago

Just weeks after tech giant Meta (META) invested $14.3 billion into Scale AI and brought on its founder, Alexandr Wang, the AI startup is laying off 200 full-time employees, or about 14% of its workforce. Interim CEO Jason Droege, who stepped in after Wang left for Meta, told employees that the company expanded its generative AI operations too quickly and became bogged down by unnecessary layers of bureaucracy. Despite the layoffs, Droege emphasized that Scale AI is still financially strong and believes that these changes will help the company respond faster to market shifts.
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The company also plans to ramp up hiring later this year in key areas, such as enterprise and public sector divisions. While Scale AI is known for helping major tech companies like OpenAI, Microsoft (MSFT), and Google (GOOG) process the data used to train their AI models, its relationships with these firms have started to change. Indeed, OpenAI has been pulling back from using Scale AI, and according to Reuters, Google is reportedly cutting ties as well after Scale's recent partnership with Meta (META).
In addition to the full-time job cuts, Scale AI is ending contracts with 500 of its thousands of contractors worldwide. Nevertheless, a spokesperson stated that the employees impacted by these layoffs will receive severance and emphasized that the company is refocusing on delivering faster and more effective data solutions for generative AI clients. At the same time, Meta continues to double down on AI hiring as it poaches researchers from its competitors.
Is Meta a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on META stock based on 41 Buys, four Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average META price target of $737.86 per share implies 5% upside potential.