Scale AI cuts 14% of workforce after Meta investment, hiring of founder Wang

Weeks after Meta poured $14.3 billion into Scale AI and hired founder Alexandr Wang, the artificial intelligence startup is cutting 200 full-time employees, or 14% of its staff.

Scale AI's interim CEO Jason Droege, who took over for Wang, told employees in a memo on Wednesday that the startup ramped up its generative AI capacity "too quickly" and created too many layers of "excessive bureaucracy." He said Scale AI remains a well-resourced and well-funded company.

"These changes will make us more nimble — enabling us to react more quickly to shifts in the market and customer needs," Droege wrote in the memo, which was viewed by CNBC. "This structure will allow us to better serve the customers we have today and win back customers that have slowed down work with us."

Droege said Scale AI will "significantly increase headcount" across its application business units in the second half of the year, including within its enterprise, public sector and international public sector divisions.

Bloomberg was first to report on the number of job cuts, which Scale AI confirmed to CNBC. 

Scale AI, founded in 2016, is best known for helping major tech companies like OpenAI, Google and Microsoft prepare data they use to train cutting-edge AI models. OpenAI has been winding down its work with Scale AI over the past year, and Google is also reportedly cutting ties with Scale AI following the company's deal with Meta, according to a report from Reuters.

Prior to the layoffs, Scale AI had a 1,400-person global workforce. Spokesperson Joe Osborne said affected employees have been provided severance. The company is also ending work with 500 contractors out of thousands worldwide, he said.

"We're streamlining our data business to help us move faster and deliver even better data solutions to our GenAI customers," Osborne told CNBC in a statement. "We also plan to make significant investments and hiring across our enterprise and government AI businesses." 

Meta has been on a multibillion-dollar AI hiring spree in an effort to better compete with rivals like OpenAI. Meta CEO Mark Zuckerberg selected Wang to serve as the company's chief AI officer, overseeing its new organization called Meta Superintelligence Labs. A small number of Scale AI employees also joined the company.

Droege wrote in the memo on Wednesday that, for the employees who are being laid off, "I want to extend our deepest gratitude for their valuable contributions and dedication to our company."

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