Scale AI, a firm focused on AI data labeling, is set to lay off 200 employees following a pivotal month with Meta. These layoffs account for 14 percent of Scale AI’s staff, along with the termination of contracts with 500 global contractors, according to Bloomberg. This occurs after a $14.3 billion investment from Meta and the exit of Scale AI’s CEO, Alexandr Wang, who is joining Meta’s superintelligence team as part of the deal.

An internal memo from Scale AI’s interim CEO, Jason Droege, seen by Bloomberg, links the layoffs to the rapid expansion of its data labeling operations, which resulted in bureaucracy and unclear team objectives. The memo also references “shifts in market demand.”

Meta’s endeavor to recruit leading AI talent to secure a competitive advantage has greatly affected the AI sector, including Scale AI. Meta’s investment gives it a 49 percent share in Scale AI, prompting OpenAI and Google to cut ties with the firm due to conflicting interests. Scale AI is well-known for its work in labeling and annotating training data, crucial for AI model development. Previously, Scale AI and OpenAI had a robust partnership, originating from the time Wang and OpenAI CEO Sam Altman were roommates during the COVID-19 pandemic.

Allegedly dissatisfied with Meta’s Llama models, Mark Zuckerberg took the initiative to gather top AI talents and researchers for a project aimed at creating AI superintelligence. Employees from OpenAI, Anthropic, Google, and Apple have transitioned to join Meta’s new team, resulting in considerable upheaval within the industry.

A spokesperson for Scale AI told Bloomberg that the layoffs are part of a reorganization to place emphasis on enterprise and government contracts. The company intends to recruit hundreds of individuals later this year for these ventures.

Disclosure: Ziff Davis, the parent company of Mashable, filed a lawsuit against OpenAI in April, claiming copyright infringement in the training and operation of its AI systems.