Three months ago, Frederik Filz-Reiterdank bought a one-way ticket from London to San Francisco. The 29-year-old studied at Oxford did not go west for the roaring social scene. ‘There’s nothing to do here in the evenings,” he said. “Literally everything is shut at 10pm.”
And yet, there is nowhere else he would rather be. Filz-Reiterdank is one of thousands who have descended on the city to chase the artificial intelligence dream. He recently founded Crewline AI, a company set up to develop software for self-driving construction vehicles. “This is by far the best place to be,” he said. “If you’re in technology, it’s very obvious, from talent to capital to ambition, that just everybody operates on a different level here. You can’t do anything but work.”
Frederik Filz-Reiterdank: “San Francisco is by far the best place to be”
CREWLINE
He is not alone. AI has fuelled a resurgence of a city that not long ago was caught in a post-pandemic “doom loop”. Well-to-do techies fled San Francisco in droves as tech companies sanctioned “work from anywhere” policies. Even as there are fears of an AI bubble bursting, locals will be hoping the city retains its sparkle. Entire city blocks were overtaken by homeless encampments and open-air drug use. A man told The Sunday Times in 2021 that his walk to work through downtown was like “night of the living dead … I’m stepping over bodies”.
San Francisco became a meme — a symbol of American urban decay. Between 2019 and 2024, the city lost 4 per cent of its population, one of the largest declines in America.
But thanks to AI — and new “tough on crime” mayor Daniel Lurie — the vibe has, unquestionably, shifted. Since 2020, more than 2,400 AI companies have been founded in San Francisco, a city of just 830,000 people. “Hacker houses”, where bright-eyed coders live communally and build what they hope will be the next Google, have cropped up across the city.
Daniel Lurie
NOAH BERGER/AP
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Even a quasi-religion has emerged: effective accelerationism, or “e/acc” for short. The core tenet: unbridled, urgent technological advance. Anyone who stands in the way or suggests aggressive regulation is branded a “decel”, or “decelerationist”.
Dara Ladjevardian is the 29-year-old founder of Delphi AI, a start-up that allows anyone to create their own AI clone to “scale” themselves. “I used to hate this city,” he said. “I was here during the pandemic. It was a pretty dark and depressing time.” What’s changed, he explained, is an influx of new people and, importantly, new ideas. “It’s less of a monoculture now,” he said. “There are a lot more different ideas about where the future is going now. The energy is good.”
“I used to hate this city,” said Dara Ladjevardian, founder of Delphi AI. “It’s less of a monoculture now”
Much like the internet boom more than a quarter of a century ago, the arrival of AI has sparked an explosion of ideas and hare-brained schemes, overexuberance and fabulous wealth. San Francisco is the place that, depending on who you believe, is either building the future for the rest of us or inflating a bubble so vast that it will — sooner rather than later — burst and wreak havoc across the economy.
Product-free start-ups are nabbing billion-dollar valuations. The top AI companies are turning workaday engineers into multi-millionaires in a matter of months. The valuation of Anthropic, maker of the chatbot Claude, has soared from zero to $180 billion (£135 billion) in four years. And unlike previous booms, companies are allowing employees to cash out their stock in private share sales, instead of waiting years for a stock market float. The buyers of those shares: investment funds desperate to get a piece of what they see as a once-in-a-generation opportunity.
The housing market is, perhaps not surprisingly, booming. Peter Rodway, at the American estate agency Compass, said he recently advised clients who were bidding on a $1.1 million apartment — a starter home in San Francisco. The seller received 15 offers, seven of which were all cash, before agreeing to sell it for $1.6 million, or about 45 per cent above the asking price. “The vibe has completely changed,” he said, due in part to the influx of “AI buyers” with huge lump sums to throw around.
The city remains one of the most expensive in the US for accommodation. The median rate for a one-bed apartment surged 12 per cent to $3,100 a month — the biggest increase in America.
ALXANDER SPATARI/GETTY IMAGES
Another sure sign that San Francisco has entered a new, if fleeting, gilded age is the surge in private security. Prominent tech executives are now regularly shadowed by beefy-looking men with sunglasses and earpieces, and hustled between locations in armoured Chevrolet Suburban SUVs. Dino Zografos, a former San Francisco police officer turned security professional, said: “I’ve never been more busy.” At 58, San Francisco is home to more billionaires per square foot than any city in the world.
Lurie, a scion of the family behind the Levi Strauss apparel empire who also forged deep ties in the tech world, was elected mayor a year ago on a promise to clean up San Francisco’s dystopic streets. It is working. He has paid recently retired police to come back to work and has overseen the first net increase in the law enforcement ranks since 2020. Violent crime rates have plunged 30 per cent. Lurie has also opened new space in homeless shelters, and started a financial aid programme to keep poor families from getting evicted.
Tom Poser, a broker at commercial real estate firm Newmark, said: “A big part of San Francisco right now is Lurie and the optimism he’s brought. You’re walking around, you’re seeing police presence, you’re feeling better. You’re not constantly feeling like something’s about to happen.”
That is not to say that San Francisco’s problems are gone; they’re just more contained. Turn the corner down the wrong block and you will still be confronted by legions of immiserated fentanyl addicts and mentally ill people shouting at everyone and no one.
Social problems persist even if they are now more contained
TAYFUN COSKUN/GETTY IMAGES
And yet, the city is pulsing with the optimism of entrepreneurs and software developers seeking to make the most of the moment. Consider Matt Deitke, a 24-year-old software developer who recently secured a four-year, $250 million pay deal to leave his start-up and join Meta’s new superintelligence unit. At $67.5 million,a year, Deitke is paid more by his employer than Lionel Messi, who brings in a mere $60 million from Miami FC.
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“The culture here is excessive,” said Filz-Reiterdank at Crewline AI. “I remember sitting next to an American start-up founder and I showed him my pitch deck draft and I said, ‘Look, this is how we get to $500 billion in revenue.’ And he said, ‘Only 500 billion?’ It’s just obscene but it forces you to think bigger.”
The concern increasingly being voiced, from London to Washington DC, is that this is an almighty bubble that, when it pops, will send shockwaves through the world. The company at the heart of it all is OpenAI. In the past six months the company has pledged to spend $1.4 trillion on data centres.
That has sent the stock prices of Nvidia, Oracle, Amazon and Microsoft — the companies that will provide the kit and operate those facilities — soaring by the trillions. But OpenAI is heavily loss-making and is set to bring in $20 billion in sales over the next year — less than 2 per cent of the cash it has pledged to spend.
When chief executive Sam Altman was asked about this apparent conundrum last week, he lost his patience: “If you want to sell your shares, I’ll find you a buyer. Just… enough.”
Sales at Sam Altman’s OpenAI are on course to bring in one fiftieth of the money it plans to spend
THE TIMESOGRAPHER RICHARD POHLE
As a young journalist starting my career in San Francisco in the year 2000, I saw first-hand the power of the collective suspension of disbelief. As the dotcom bubble inflated, number-crunching analysts decided that profits didn’t matter. Bankers floated companies that were little more than concepts. And those who deigned to question the mania were dismissed: they didn’t get it. The arrival of this new technology meant the old rules no longer applied.
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Except, of course, they did. And when the bubble popped, all of the bad ideas and heavily embroidered financial models seemed, in retrospect, so obviously bad and embroidered.
The argument is that this time will be different. It is summed up by what former Google chief Eric Schmidt has dubbed “the San Francisco consensus” — the notion that very soon, perhaps in three to five years, the industry will crack artificial general intelligence (AGI).
Eric Schmidt
REUTERS/MARCO BELLO
The term describes AI systems that are better than humans at all cognitive and economically valuable work — an invention so profound that it would upend virtually every aspect of life.
It is the biggest of ideas. Yet last week saw $1 trillion shaved off the value of the top tech companies as Wall Street fretted that San Francisco’s crop of AI won’t deliver on that promise.