A frustrated Zuckerberg makes his biggest AI bet as Meta nears $14 billion stake in Scale AI, hires founder Wang

Mark Zuckerberg is so frustrated with Meta's standing in artificial intelligence that he's willing to spend billions of dollars to convince Scale AI CEO Alexandr Wang to join his company, people familiar with the matter told CNBC.

Meta is finalizing a deal to invest $14 billion into Scale AI, according to a person familiar with the matter who asked not to be named because the terms are confidential. Bloomberg reported earlier this week that an investment could top $10 billion, and a story from The Information on Tuesday said Meta would pay close to $15 billion.

As a founder of one of the most prominent AI startups, Wang has built a reputation as an ambitious leader who both understands AI's technical complexities and how to build a business that's not merely focused on research, according to two former Meta AI employees who agreed to speak on the condition of anonymity. Zuckerberg will be counting on Wang to better execute Meta's AI ambitions following the lukewarm launch of the company's latest Llama AI models.

By not directly acquiring Scale AI, Meta appears to be taking a similar strategy as companies like Google and Microsoft, which have brought in prominent leaders in AI from the startups Character.AI and Inflection AI by taking large stakes in those companies rather than buying them outright. Meta is currently on trial against the Federal Trade Commission for antitrust claims, and the company doesn't want to further upset regulators by acquiring Scale AI, multiple people familiar with the matter said.

As part of the deal, Meta will take a 49% stake in the data-labelling and annotation startup, The Information reported, while Wang will help lead a new AI research lab at the social networking company and will be joined by some of his colleagues. The New York Times was first to report about the new AI lab.

Scale AI, founded in 2016, has made a splash in the era of generative AI by helping major tech companies like OpenAI, Google and Microsoft prepare data they use to train cutting-edge AI models. Meta is one of Scale AI's biggest customers, according to two people familiar with the matter.

The startup, valued in a funding round about a year ago at $14 billion, is number 28 on CNBC's Disruptor 50 list. In mid-2024, the company signed one of the biggest recent commercial leases in San Francisco, gobbling up about 180,000 square feet of space in a downtown building that had been occupied by Airbnb.

Scale AI has increasingly made in-roads into the defense industry, and in March announced a multimillion dollar deal with the Department of Defense. In November, it collaborated with Meta on Defense Llama, a custom version of Meta's open-source Llama foundation model designed specifically to "support American national security missions," the company said in a blog post.

Meta and Scale AI declined to comment.

Heading into 2025, AI was one of Meta's top priorities. But Zuckerberg has grown agitated that rivals like OpenAI appear to be ahead in both underlying AI models and consumer-facing apps, current and former Meta employees said.

Zuckerberg has been deprioritizing its Fundamental Artificial Intelligence Research unit, or FAIR, in favor of its more product-oriented GenAI team to help Meta make headway in AI and improve its Llama family of AI models, CNBC previously reported.

Meta's release of its Llama 4 AI models in April was not well received by developers, further frustrating Zuckerberg, the people said. At the time, Meta only released two smaller versions of Llama 4 and said it would eventually release a bigger and more powerful "Behemoth" model.

That model has yet to be made available due to Zuckerberg's concerns about its capabilities relative to competing models, the people said. In particular, there is concern about how Behemoth stacks up against the latest from companies like OpenAI and China's DeepSeek, whose models are preferred by the wider developer community.

Following Llama 4's lackluster debut, Meta conducted a reorganization of its GenAI unit, splitting it into two. Connor Hayes, a longstanding Meta employee, was put in charge of AI Products, while AGI Foundations was given to Amir Frenkel, previously a vice president of engineering and product for Meta's Reality Labs hardware unit, and Ahmad Al-Dahle, the previous head of GenAI.

Al-Dahle's new position as a co-leader was seen as a sign that Zuckerberg had lost confidence in him, the people said.

Zuckerberg admires Wang and considers him capable of a major role at Meta as an AI leader, the people said. A dropout from the Massachusetts Institute of Technology, Wang has built a sizable business and is familiar with AI's technical intricacies. The people described Wang as a "wartime CEO" who is in line with Zuckerberg's position that the U.S. faces increasing competition from China, thus requiring help from the tech industry.

Wang told CNBC in January that he believes there is an "AI war" between the U.S. and China, and that the U.S. will need more computing power in order to compete.

"The United States is going to need a huge amount of computational capacity, a huge amount of infrastructure," Wang said at the time. "We need to unleash U.S. energy to enable this AI boom."

It's an unusual move for Zuckerberg, who has traditionally put loyalists in high-ranking positions. But it shows the magnitude of the moment and Zuckerberg's belief that a prominent outsider like Wang may be better positioned than any current Meta employee to bolster the company's position in AI, the people said.

Wang also brings a lot of outside knowledge of how competitors like OpenAI are building their consumer chatbots and AI models. Data labelling and training has become more complicated in recent years as the capabilities of AI models has increased, said Vahan Petrosyan, the CEO of SuperAnnotate, one of Scale AI's competitors.

"I would say Scale have covered probably 70% of all the models that are built," Petrosyan said. With Wang and others from Scale AI, Meta could gain "collective intelligence on how to build a better ChatGPT.""When Meta is buying them, they're buying their intelligence," Petrosyan said.

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