Can artificial intelligence reverse the tech downturn? Startups are hiring for the next big thing.

By Jon Swartz

Millennials who want to be part of the AI ​​”gold rush” are moving to San Francisco’s “Cerebral Valley” and other tech hubs across the country

At the end of March, more than 200 AI experts met in San Francisco’s Hayes Valley neighborhood – a hub for artificial intelligence nicknamed “Cerebral Valley” – to discuss the red-hot technology and how to build companies around it.

“The general consensus was that this is something that can be incredibly useful and dangerous. It’s happening and there’s no stopping it,” said Evan Buhler, co-founder and CEO of Generative Counsel, a San Francisco-based startup.

“I moved to the Bay Area from Florida in January to be a part of something special,” Buhler told MarketWatch. “It almost feels like fate. AI could become the economic and spiritual center of San Francisco.

Chooch, a startup that released an AI mobile app this week, says 15 people have joined the company in the last three months, most of them outside of California and some outside of the US “Tech world” after months of shrinking Market valuations, falling ad spend, layoffs, high interest rates, a turbulent economy and the burning of Silicon Valley Bank, Emrah Gultekin, CEO of Chooch, which now has 73 employees, told MarketWatch.

And artificial intelligence isn’t just driving the return to San Francisco — it’s also drawing millennials into AI tech hubs across the country as they seek to be a part of the next big thing. Venture capital firms and big tech companies are pouring billions of dollars into AI technology. According to data from Stanford University’s Institute for Human-Centered Artificial Intelligence, there were nearly 800,000 AI-related job openings in the US last year, led by 142,000 in California — and the pace seems to be accelerating.

Though the San Francisco Bay Area lost 53,000 residents last year, that was less than a third of the number of people who left in 2021, according to data released by the US Census Bureau last week.

On Thursday, Garry Tan, CEO of startup accelerator Y Combinator, said more than 80% of the startups in his company’s youngest group are based in San Francisco, and many of them are working on AI.

Despite a significant drop in venture capital and deals in the first quarter of 2023, AI continues to prove attractive to investors. Last month, a $150 million investment in startup, led by venture capital firm Andreessen Horowitz (known as a16z), brought the startup $1 billion in value.

The average pre-money valuation for generative AI companies has catapulted from $42.5 million in 2022 to $90 million in 2023 based on nine deals PitchBook tracked through March 29 .

“The settlers are fighting for their 40 acres [of digital land]said Charley Moore, the CEO of Rocket Lawyer Inc., who is a longtime participant and observer in Silicon Valley. “Tech can have something of a herd mentality, and AI has captured some of the crypto zeitgeist.” (Before AI, crypto was all the rage in tech and sparked a land rush of its own before cooling off recently.)

California isn’t the only destination for budding AI entrepreneurs. Texas, New York, and Florida are other big hubs, according to the Institute for Human-Centered Artificial Intelligence.

Appian Corp. (APPN), a Tysons, Va., cloud company with AI apps plans to hire 600 to 700 employees this year after adding 800 last year, bringing the total headcount to 2,300. And AI startup All Turtles, which relocated from San Francisco to Arkansas in late 2020, continues to steadily hire new employees, CEO Phil Libin told MarketWatch.

Still, the surge in AI development has brought some millennials who left during the pandemic back to the Bay Area. At the SXSW tech conference in Austin, Texas in March, “there was a lot of talk about it,” Muddu Sudhakar, chief executive officer of AI startup Aisera, told MarketWatch. “People said they were coming back to the Bay Area to be part of the AI ​​revolution.”

He added: “ChatGPT has been the talk of every session, every discussion, and young people want to be in the middle of the action. It was like the gold rush.”

Also Read: Biden Meets with Advisors on ‘Risks and Opportunities’ in AI Technologies

“AI is everywhere,” said John Chambers, former CEO of Cisco Systems Inc. (CSCO), whose company JC2 Ventures backs more than a dozen AI startups. “It’s the third big frontier of my time in tech, and it will be bigger than the first two — the internet and the cloud.”

Debasish Biswas, chief technology officer at AI data platform Aware, based in Columbus, Ohio, said the number of applications for engineers has jumped into the hundreds, triple from the previous quarter. Many of them come from job seekers in the Seattle and Silicon Valley areas, and from current and former employees of big tech companies such as Alphabet Inc. (GOOGL)(GOOGL) Google, Inc. (AMZN ), Salesforce Inc. (CRM) and Facebook parent Meta Platforms Inc. (META) — all companies that have announced layoffs in recent months.

“People would rather be working on solutions used by top brands than being many layers away from the activity,” Biswas told MarketWatch.

Also read: The US economy created jobs again in March. Is this your last chance to jump overboard?

Kira Makagon is Chief Innovation Officer at cloud software company RingCentral Inc. (RNG) and leads the company’s AI efforts. She said the recent rounds of layoffs and the current economic crisis have prompted tech talent to “make and do some fun things” at young AI startups.

Indeed, the bloat over AI — almost every major tech CEO has embraced the technology and hyped their own offerings over the past few months, often during quarterly phone calls with analysts — has contributed to a three-ring circus atmosphere that’s turning San Francisco Bay seems to be the focus.

“We’re just at the beginning of AI,” Appian CEO Matt Calkins told MarketWatch. “The classic debate between hype cycle and trust is at work here. AI is a tool, not a substitute. And it will be a roller coaster ride for at least six months.”

Also Read: The ‘Explosive’ AI Trend Will Continue These stocks will benefit

And: ‘Shall we risk losing control of our civilization?’ Elon Musk, Steve Wozniak and other tech leaders are petitioning to stop AI development

-Jon Swartz

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently of Dow Jones Newswires and The Wall Street Journal.

(ENDS) Dow Jones Newswires

04-07-23 1200ET

Copyright (c) 2023 Dow Jones & Company, Inc.