San Francisco is bracing for an influx of wealth as Anthropic and OpenAI prepare to go public, with valuations of $965 billion and $852 billion, respectively. The city has seen big IPOs before, but nothing on this scale. The combined valuation of the two AI giants is orders of magnitude larger than anything San Francisco has seen, and it’s expected to have a significant impact on the local economy.

Secondary Effects

While the city itself won’t see a direct windfall from the IPOs, the secondary effects will be substantial. The influx of money will lead to increased spending, investment, and job creation in various sectors, including real estate, professional services, and startup activity. According to Ioannis Spyridopoulos, a finance professor at American University, for every $10 million in IPO proceeds, an extra 41 jobs and 0.7 new businesses are created in the zip codes around the company’s headquarters.

The city’s past efforts to tax IPOs have been unsuccessful, and California law prohibits municipalities from imposing income taxes. As a result, the city will see only a modest bump in revenue through direct taxes. Instead, the impacts will be concentrated on high-end real estate, local services, startup activity, and professional services.

Real Estate and Housing

The surge in wealth is likely to drive up housing prices, making it even more challenging for average San Francisco residents to afford homes. A study published in the journal Real Estate Economics found that local house prices start to rise the same day that a potentially large IPO is announced, before newly minted wealth even has access to the money. Buyers are already feeling the pinch, and the city’s real estate market is expected to become even more competitive.

Original reporting: Mission Local — read the source article.