Missing Link: Strict Laws and Wealth Tax – A Turning Point for Silicon Valley?
The California Effect, similar to the European Brussels Effect, has repeatedly drawn criticism. This has changed Silicon Valley and will continue to do so.
(Image: Daniel AJ Sokolov)
However, it remains to be seen whether the law will actually be ratified. First, it would have to be put to a vote in November 2026 through a popular initiative. To achieve this, more than 900,000 signatures would need to be collected. But the discussion has already led some billionaires and their companies to leave California. For example, the two Google founders, Sergey Brin and Larry Page, have relocated numerous companies to Nevada and Florida – including those managing their yachts and stakes in a private airport terminal. The well-known investor Peter Thiel has also moved his company "Thiel Capital" to Miami as a direct consequence.
Corona, Regulation, and Ideological Differences
High-profile departures have been occurring for years. One of the most well-known moves from California is likely the relocation of Tesla's headquarters from Silicon Valley to Austin, Texas. The city has already borne the name "Silicon Hills" since the beginning of the millennium. After Elon Musk himself moved from Los Angeles to Austin in 2020, the automaker's headquarters finally followed in 2021. This came after a dispute between the billionaire and the state over a factory closure during the Corona pandemic.
In the same year, software giant Oracle also moved from California to Austin. The company cited more flexible working conditions as the reason, making a large headquarters in California redundant. Founder and CEO Larry Ellison moved his own residence to Hawaii.
Hewlett Packard Enterprises justified its move to Houston, Texas, less dramatically at the time. They stated they were fleeing astronomical real estate prices and aiming for a better base to recruit talent. The cost of living in Silicon Valley is enormous.
Chevron, SpaceX, and Twitter successor X relocated their headquarters to Texas in 2024. In addition to California's strict regulatory environment, another law prompted the move of the two companies from Musk's empire. The law "AB 1955" prohibits school employees from publicly disclosing a child's sexual orientation without their consent. Elon Musk described the law on X, in essence, as the straw that broke the camel's back. One of his own daughters is transgender.
Palantir also moved to Denver, Colorado, in 2020. In the IPO filings, the company stated at the time: "The engineering elite of Silicon Valley may know more about developing software than most others. But they do not know more about how society should be organized or what justice requires."
Tech Map Diversifies
The US state that benefits most from migration is Texas. Of the 135 companies that have relocated their headquarters there in recent years, 41.8 percent came from California, according to a report from a real estate company. The so-called "Texas Triangle," between Dallas-Fort Worth, San Antonio/Austin, and Houston, has particularly benefited. In Austin alone, 16.44 percent of the population works in the tech sector, with almost 24 percent of them active in sales. The region primarily covers areas such as fintech and the semiconductor industry (Texas Instruments), while Houston is home to companies from the energy and logistics sectors.
Unlike the predominantly headquarters-focused region around Dallas, Phoenix in Arizona also benefits as a semiconductor manufacturing location. In addition to Intel, TSMC is among the resident companies. Both regions have benefited from the "California Environmental Quality Act," or CEQA. The additional regulatory effort makes it difficult to complete projects quickly. Around Phoenix, there are also several greentech companies, including originally Meyer Burger and Nikola. However, both companies are now insolvent.
In neighboring Utah, the "Silicon Desert" is not only transforming into "Silicon Slopes," but the resident industries are also changing. Around Salt Lake City, there are particularly many companies from the Software-as-a-Service sector and the fintech sector. Among the better-known names are, for example, Qualtrics (headquarters in Provo, Utah) as well as large branches of Adobe, Microsoft, and Oracle.
Colorado is also benefiting from the business environment in California. For instance, Colorado Springs has established itself as a cybersecurity hotspot in recent years. Maxar Technologies, a company in the field of radar and satellite technology, moved its headquarters from California to Colorado following an acquisition.
Another state that has experienced high corporate immigration in recent years thanks to its low taxes is Florida. Investors like Peter Thiel and companies from the crypto/Web3 and fintech sectors are particularly drawn to the Sunshine State. Income and capital gains taxes play a special role here. While California taxes capital gains as regular income at up to 13.3 percent, both are not taxed at all in Florida.
Washington State, home to major cloud providers like Microsoft, Amazon Web Services, and F5 Networks, has not seen any relocations from California. However, many of the major providers, in addition to those mentioned, already have offices in and around Seattle. These include Google and Meta, as well as Oracle.
Other important tech hubs include Boston, with companies like Boston Dynamics, and New York. Major tech companies such as Google, Microsoft, Amazon, and SAP have large branches there. The state is considered one of the focal points for career starters. Approximately 26 percent of those working there hold junior positions, compared to nearly 56 percent in senior roles.
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The End of Silicon Valley?
Does California, which according to Governor Gavin Newsom is the fourth-largest economy in the world, have to worry about its significance as a location? Not at all. Especially in the AI boom of recent years, Silicon Valley has re-established itself as an absolute hotspot. Nearly seven percent of office space is occupied by AI companies alone. The job market reflects a similar trend. Job postings in the AI sector increased from 20 percent in mid-2022 to 42 percent in June 2025. Furthermore, 70 percent of all AI venture capital funding from 2019 to the present has found its way into Silicon Valley. Overall, startups from California have claimed around 49 percent of the entire venture capital market, writes Carta, a company for equity management.
Current developments suggest the emergence of a "hub-and-spoke" model, where companies have their headquarters in locations with low or no taxes. Their other locations, however, are oriented towards the availability of talent. After all, only a few companies have completely withdrawn from Silicon Valley. The market has not fully shifted anyway. In both Austin and Houston, there was a decline in the number of employees at venture capital-funded startups in 2024, by six and almost 11 percent, respectively.
And the "Billionaire Tax Act"? Should it be put to a vote, Governor Newsom has already announced in an interview with the New York Times that he will ensure the bill is rejected. Other billionaires view the discussion with more equanimity. "We've chosen to live in Silicon Valley," said Nvidia CEO Jensen Huang in a Bloomberg interview. "And whatever taxes they want to levy, so be it." He is not worried; he is focused on developing the future of AI. That is precisely why Nvidia is in Silicon Valley: the talent is there. It remains to be seen what happens if the AI bubble bursts.
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