Surge AI, a rising competitor to Scale AI in the data-labeling space, is reportedly seeking to raise up to $1 billion in its first-ever funding round, according to sources familiar with the matter. The capital raise could push the company’s valuation above $15 billion, although discussions are still early and final figures may change. The funding round is expected to include both primary investments and secondary share sales to provide liquidity for employees.
Founded by former Google and Meta engineer Edwin Chen, Surge AI has defied industry norms by remaining bootstrapped and profitable since its inception in 2020. In 2024, it surpassed $1 billion in annual revenue—significantly more than Scale AI, which reported around $870 million in the same timeframe.
While Scale AI recently made headlines after Meta acquired a 49% stake and appointed its CEO Alexandr Wang to lead its new Superintelligence Labs, this move has prompted concerns among Scale’s major customers, including Google and OpenAI. Fears over potential data exposure to Meta have reportedly caused several clients to reconsider their partnerships with Scale. Surge AI is now benefiting from this customer shift, positioning itself as a trusted alternative.
“Surge AI declined to comment.”
Known for its premium labeling services, Surge AI has taken a unique approach by building a high-quality contractor network instead of depending on large pools of low-wage workers. This strategy has helped the company stand out as reinforcement learning from human feedback (RLHF) becomes a core component in training advanced AI models. Companies like OpenAI, Anthropic, and Google have reportedly used its services.
The fundraising effort is expected to test broader investor sentiment in the data-labeling market. Some investors see data annotation as essential to AI progress and anticipate continued growth. Others, however, express skepticism due to the sector’s labor-intensive nature and concerns about automation potentially reducing future demand for manual labeling.
If successful, the funding round could make Surge AI one of the most valuable private companies in the AI data infrastructure space, further challenging Scale AI’s dominance and reshaping the competitive landscape.
