Meta investing in Scale AI could boost AI exposure, provide ‘positive catalyst:’ SA analysts

If Meta Platforms (NASDAQ:META) goes ahead with an investment into Scale AI, it could boost its exposure to artificial intelligence, and provide a “positive catalyst” for the Mark Zuckerberg-led company, Seeking Alpha analysts said.

“This investment in Scale AI might accelerate META’s AI applications roll up and their monetization,” Seeking Alpha analyst Geneva Investor said via email. “Synergies might come from better data labeling to improve META’s own models, or in defense and military applications (the two companies already collaborate on Defense Llama). I am excited to see what’s next.”

Jonathan Weber, Investing Group Leader for Cash Flow Club, agreed, and said the rumored $10B investment could be easily digestible for a company with Meta’s cash flows.

“Management has proven to be very competent in identifying quality targets in the past, including via its Instagram acquisition, thus I don’t think that the risk of overpaying is overly high,” Weber said via email.

If the investment (reported to be around $10B in size) actually comes to fruition, it would rank among Meta’s largest financings ever. In 2014, Meta (then known as Facebook) acquired WhatsApp for $14B. It paid approximately $1B in cash and stock for Instagram in 2012 and approximately $2B for Oculus VR in 2014.

Scale AI, founded in 2016 by Alexandr Wang, provides data-labeling services used to train machine learning systems. The company’s technology underpins efforts by clients such as Microsoft (MSFT) and OpenAI, and it has emerged as a central player in the generative AI surge. Its most recent funding round in 2024 pegged its valuation at approximately $14B, with investors including Meta and Microsoft (MSFT).

Earlier this year, reports suggested the company was pursuing a tender offer that could value it as high as $25B.

Seeking Alpha’s Rob Williams contributed to this story.