Meta Is Making a Big Bold Investment of Over $10B in Scale AI

Meta Platforms (META) is reportedly in talks to invest over $10 billion in artificial intelligence (AI) startup Scale AI. The news was first reported by Bloomberg, citing people familiar with the matter. If finalized, this investment would represent a significant shift for Meta, marking its largest external funding commitments to date. It would also be one of the largest private-sector funding deals in the AI sector to date.

The terms of the deal remain unknown and are subject to change. The startup was valued at $13.8 billion in its most recent funding round, in which Meta, Nvidia (NVDA), and Amazon (AMZN) had participated. Bloomberg had reported earlier this year, that Scale AI was in talks for another funding round, potentially valuing the company at roughly $25 billion.

Meta Is Investing Billions in Scale AI

Scale AI was founded in 2016 by CEO Alexandr Wang. The company specializes in data labeling: assigning labels/tags to images, text, and other data used for training AI models. Scale AI has been growing rapidly and has become one of the prime beneficiaries of the generative AI revolution. In 2024, Scale AI generated revenue of $870 million and is set to more than double its sales this year to reach $2 billion.

Scale AI serves a diverse set of customers, including Microsoft (MSFT), ChatGPT maker OpenAI, and the U.S. Department of Defense. The company uses a vast network of contract workers to scan, organize, and label troves of datasets, thus facilitating efficient AI model training. This process is crucial, since machine learning models require the usage and input of enormous amounts of data, and Scale AI’s services enable companies to train their models more swiftly and with greater precision.

Meta Is Going All-In on AI

Meanwhile, Meta is going all-in on AI investments. It has committed to invest up to $65 billion in AI related projects this year. Although Meta does not operate its own cloud services platform, it has developed a successful series of large language AI models called Llama. Meta’s Llama chatbot is used by approximately 1 billion users per month on its Facebook, Instagram, and WhatsApp apps. Notably, Meta and Scale AI have also partnered earlier to develop the Defense Llama model for the government.

Moreover, Meta’s AI models are used by U.S. government agencies and defense contractors for military applications. Last week, Meta also struck a 20-year deal with nuclear energy company Constellation Energy (CEG) to buy green credits from its Illinois nuclear plant, effective 2027. This deal ensures a stable and sustainable energy supply for Meta’s massive AI and data center operations, supporting its commitment to achieving net-zero emissions.

Is META a Good Company to Buy?

Wall Street remains highly optimistic about Meta Platforms’ long-term stock trajectory. On TipRanks, META stock has a Strong Buy consensus rating based on 41 Buys, three Holds, and one Sell rating. Also, the average Meta Platforms price target of $697.55 implies that shares are almost fully valued at current levels. Year-to-date, META stock has gained 19.3%.

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