Despite threats of a billionaire exodus and consistent complaints about the difficulty of doing business in California, it attracted three times more venture funding this year than every other state combined.
The Golden State has attracted $366 billion, or around 90% of all the venture capital for the U.S. so far this year, according to investment data provider Pitchbook.
The state’s deep pool of talent, rich investors and other tech infrastructure have made it ground zero for the artificial intelligence explosion. This has also created severe concentration in the sector, with 86 cents for every dollar of venture capital raised going to AI companies.
No other state came close, with second-ranked New York attracting one-thirteenth of the capital, with $27 billion in deals announced.
Pitchbook data showed that four out of the top 25 companies that raised the largest venture capital funding in 2026 were based in Southern California. The four companies were defense technology companies Anduril Industries and Shield AI; Uber cofounder Travis Kalanick’s new venture, Atoms; and El Segundo-based nuclear energy startup Valar Atomics.
The sustained investment in California continues despite concerns over the passing of a billionaire tax bill to fund healthcare and education that’s coming up for a vote in November.
The state’s ultra-rich have been resistant, with Google co-founder Larry Page pouring in $100 million to fight the wealth tax. California Gov. Gavin Newsom has opposed the ballot measure and has argued that it would drive away investors.
While some ultra-rich residents have shifted to other states, and businesses often complain that high property and energy costs and an anti-business regulatory regime make it too tough to make money in the state, the inability of the top talent, companies and investors in AI to set up elsewhere shows California’s enduring attraction.
The state’s economy grew 5% last year to a record $4.25 trillion, making it larger than every country other than the U.S., China and Germany. It is home to nearly 400 billion-dollar startups — more than any other state, according to CB Insights.
Excessive focus on AI investment has crowded out investment in other sectors. Just two companies, Anthropic and OpenAI, accounted for half of the $366 billion in venture capital raised this year. Both companies have filed confidentially to go public and are heading toward a listing later this year.
The gold rush for artificial intelligence has already created a windfall for the state from a surge in income tax collected on stock market gains. Forecasts last June projected a $12.6-billion deficit this fiscal year, according to the California Department of Finance. Updated predictions now suggest the state will end the year with a surplus of $4.5 billion.
