Surge AI, a data-labeling company competing with Scale AI, has hired advisors to raise up to \$1 billion in its first-ever funding round, according to sources quoted by media. The move comes as the company looks to take advantage of rising demand for its services, especially after Scale AI recently lost several key customers.
Founded by Edwin Chen, a former Google and Meta engineer, Surge AI is reportedly aiming for a valuation of over \$15 billion. However, sources said discussions are still in the early stages, and the final valuation could be even higher. The funding round is expected to include both primary and secondary capital, which will also provide liquidity to employees.
Surge AI has been profitable so far and was self-funded by Chen. Last year, the company generated more than \$1 billion in revenue, surpassing Scale AI, which reported \$870 million during the same period.
For comparison, Scale AI was valued at \$14 billion in a funding round last year and was most recently valued at nearly \$29 billion after Meta acquired a 49% stake in the company and hired its CEO, Alexandr Wang, to lead Meta’s Superintelligence Labs as chief AI officer.
Surge AI declined to comment on the funding plans.
Like other competitors, Surge AI is seeing growth due to customer concerns following Meta’s investment in Scale AI. Major clients such as OpenAI and Scale’s largest customer, Google, are now looking to shift away from Scale AI over fears that their research priorities could be exposed to Meta. Scale AI, on its part, has said its business remains strong and that it is committed to protecting customer data.
Founded in 2020, Surge AI has quietly grown to become one of the biggest players in the data-labeling space. Based in San Francisco, the company has stayed away from the typical Silicon Valley approach of raising large venture capital rounds and has instead focused on delivering high-quality, premium data-labeling services.
Its client list includes major AI research labs such as Google, OpenAI, and Anthropic. The growing importance of reinforcement learning from human feedback (RLHF) in building advanced AI models has increased the need for high-quality, well-labeled datasets. Surge AI has capitalized on this trend by working with a network of highly skilled contractors, rather than relying on large numbers of low-wage workers.
The planned fundraise will be a key test of investor confidence in the data-labeling industry. While some investors see it as essential to AI development with steady demand from leading AI labs, others worry that the industry’s dependence on human labor and low profit margins could make it vulnerable as AI-driven automation reduces the need for manual annotation.
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