San Francisco has spent the past two years selling itself as the undisputed capital of artificial intelligence, and its two biggest tenants are about to test the promise. OpenAI and Anthropic are each poised for stock market debuts that could top a trillion dollars, among the largest in history. The natural expectation is a gusher of new wealth pouring back into a city still clawing its way out of a pandemic slump. According to the economists the San Francisco Chronicle canvassed, the more likely answer is: not much, at least not directly.
The reasons are structural. Like most American cities, San Francisco levies no local income or capital gains tax. It once captured tech windfalls through a payroll tax that counted stock compensation, but the city phased that out to stay competitive and voters repealed it entirely in 2020, replacing it with taxes tied mostly to company revenue. So when a newly minted OpenAI millionaire sells shares, the city sees little of it. California taxes capital gains at the state level and will benefit there, but its own finance officials call the timing and scale too uncertain to bank on. Ted Egan, the city's chief economist, put the human scale plainly: "It's liable to be a relatively few number of people, less than a couple thousand, with a lot of money."
That is a marked contrast with the last boom. When Facebook and Uber went public in the 2010s, at valuations of $103 billion and $82 billion, the gains were spread across dozens of companies and thousands of employees. The AI wave is concentrated in two firms. And much of the upside has, in a sense, already arrived. UCLA finance professor Barney Hartman-Glaser notes that employees are getting rich well before any bell rings on Wall Street; Anthropic workers cashed in an estimated $4 billion of shares in a company-arranged sale in February alone. "People have this narrative that on the day Anthropic does its IPO, there's going to be many new millionaires," he said. "The reality is those millionaires are already here."
You can see them in the housing market, if nowhere else. More than 140 San Francisco homes sold for at least $1 million over asking in the first half of the year, and the city's rental vacancy rate, at 2.2 percent, is the lowest of any major US metro. Past research found that simply filing IPO paperwork lifts nearby home prices, partly because sellers hold off to time the market. But the same enthusiasm sets off alarms. The state's nonpartisan Legislative Analyst's Office warns that surging tax revenues "appear unsustainable" and that the market looks, on its face, like a speculative bubble "rivaled only by the dot-com boom and the Roaring Twenties." As a cautionary note, SpaceX's record $2.1 trillion debut last month has already slid about 20 percent.
Whether this time proves different may come down to what the winners choose to do. Mayor Daniel Lurie, who ran the antipoverty nonprofit Tipping Point before taking office, is lobbying the companies to invest locally rather than park their gains in donor-advised funds that take years to reach the street. Some in the sector think AI's wealth could behave differently, precisely because its leaders talk so openly about the technology upending work. The most durable benefit, economists agree, will not be the Lamborghinis or the charity galas but the multiplier: the restaurants, construction crews and service jobs that a concentrated boom pulls along with it. The catch is that today's tech giants have shed jobs faster than the AI startups can hire, which is why this gold rush, for all its zeros, may leave a lighter footprint than the last.