In the autumn of 2022, Alexandr Wang, the CEO of Scale AI, identified a significant opportunity: a deal with TikTok where his company, a $7. 3 billion AI data-labeling company, would offer insights to the social media giant's advertisers. According to sources familiar with the matter, although the initial pilot was valued at less than $1 million, Wang believed that a larger contract could yield enormous potential. However, as Wang pushed for the deal, leaders at Scale became anxious, as three individuals with direct knowledge of the situation informed Forbes. Just two years earlier, then-President Donald Trump had announced intentions to ban TikTok, claiming that the app, owned by the Chinese company ByteDance, posed a threat to US national security. TikTok was still undergoing a national security review due to concerns about potential Chinese Communist Party access to American user data, an assertion that TikTok has denied. Given this context, a partnership with TikTok was not viewed favorably. Some executives were concerned that it could jeopardize future government contracts, according to sources. Despite the reservations expressed by Scale's leadership, Wang, who has emphasized his role as a leader in defense technology and his belief that surpassing China in the AI race is a matter of national security, remained steadfast in pursuing the deal. He believed that the commercial opportunity was too great to pass up. A former Scale federal team employee, who requested anonymity out of fear of repercussions from the company, described Wang as disregarding their concerns and prioritizing the long-term goals of both parties involved. However, when Forbes reported that ByteDance, the parent company of TikTok, had planned to surveil American citizens using the app's geo-location data, Scale reevaluated the deal. Less than a month after the partnership commenced, Scale confirmed to Forbes that discussions with TikTok had ended. Bill Evanina, the former director of the US government's National Counterintelligence and Security Center, shared his perspective on such a deal, stating that strategically and from both a perception and security standpoint, it would be a poor decision. He acknowledged the potential for greater financial gains but emphasized the negative implications and reputational risks involved. Scale's decision to back out of the deal with TikTok was seen as averting a catastrophe, according to Evanina. This reversal was just one of the concerns voiced by some executives that could undermine Scale's efforts to establish a government and military business, which Wang himself has prioritized, according to internal communications and interviews with former employees and industry sources. John Brennan, Scale's general manager for the public sector, emphasized the company's commitment to national security and safety. Wang highlighted Scale's provisional clearance from the Department of Defense (DoD) that enables access to unclassified data and its participation, along with six other companies, in the Biden-Harris administration's commitment to ensure the safety and security of AI. TikTok declined to comment on the matter. Scale, which utilizes human labor for data labeling and has expanded to provide other data analytics services, began working with the government in 2020. Wang's inspiration for Scale's defense arm came partially from a visit to China in 2018, during which he visited the offices of ByteDance and other tech companies. He was impressed by their AI advancements but also concerned about the potential threat they posed to American leadership. Scale is now among several tech companies actively pursuing defense contracts. From 2020 to the end of the third quarter of 2023, Scale spent $1. 95 million on lobbying the federal government, according to lobbying disclosures. Public government contracts during the same period reached $90 million, as shown by procurement records (this figure does not include potential non-public contracts).

As of 2023, Scale's public sector business employed over 100 individuals. Brennan noted that Scale currently has 20 active government contracts. As the government business expanded, concerns concerning Scale's work with the government and its capabilities arose among leaders on the federal team, extending beyond the TikTok deal. According to three sources, military personnel raised concerns about perceived exaggerations of Scale's government work and the extent of its capabilities on two occasions. Last year, Scale announced the launch of its national security-focused product, Donovan, a platform that adapts large language models (LLMs) like OpenAI's GPT-3. 5 for use with classified information. Scale claimed that Donovan would be deployed for "critical use cases" by the Army's XVIII Airborne Corps, enabling military personnel to comprehend and organize the ever-increasing volume of data without specific training or coding experience. It was stated that Donovan could significantly shorten the cycle for air tasking orders. However, sources familiar with the matter informed Forbes that Scale had overstated the nature of the partnership, with Colonel Joe O'Callaghan indicating that Scale did not have access to the XVIII Airborne Division's air tasking orders at the time. Brennan defended the press release, stating that Scale stands by it but was unable to comment on specific contractual agreements. Months later, during a pitch meeting with the US Central Command, General Michael Kurilla reportedly informed Wang that Donovan was not yet ready for production after seeing a live demonstration. However, Brennan stated that Kurilla did not express those concerns to Scale. Wang asserted that Donovan is currently utilized by over 80 government organizations. Two sources mentioned that as of late 2023, trials and pilot programs represented the majority of Donovan's usage, but Scale struggled to convert them into full-fledged contracts. Scale did not respond to inquiries regarding whether this tally includes organizations that signed up for the free trial offered on its website. The Defense Department did not respond to questions about the XVIII Airborne Corps or US Central Command. Securing the Project Maven contract facilitated Scale's entrance into the defense sector. Previously, Google employees had protested the AI initiative's use of their technology to analyze drone strike footage. Multiple individuals familiar with the matter shared that the Defense Department had asked Scale to apply for the Project Maven contract. A source with knowledge of the situation stated that the government assisted Scale throughout the process to ensure its competitiveness. Brennan declined to comment on Project Maven, citing constraints imposed by publicity clauses on discussing certain government contracts. According to spokesperson Sue Gough, the Defense Department adheres to regulations on acquisition and contracting. Gough declined to comment on the specifics of the Project Maven negotiations. As of 2023, Project Maven constituted the majority of Scale's federal revenue and was integral to its defense business. The contract is set to expire in the spring, at which point Scale will need to compete for its renewal. Brennan highlighted that federal business revenue has grown by 160% since 2021 and refrained from disclosing further specifics, citing confidentiality agreements. Supporting US national security interests remains a chief priority for Wang. During an AI forum hosted by Senator Chuck Schumer in December, Wang reiterated his resolve, referring back to his trip to China and stressing his commitment to supporting the US.