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Proclamations of the Bay Area's post-pandemic demise may have been premature, as the generative AI boom injects new life into the tech hub.

Silicon Valley and the surrounding Bay Area has been at the epicenter of the technology industry for more than 70 years. In that time it has seen its population swell and ebb in tune with the industry at large. However, a global pandemic, transformative technological advancements, and financial upheaval has put the 1,800 square mile stretch under more scrutiny than ever before.

According to various sources, the region is still losing tech jobs due to (among other factors) labor-market corrections for early-COVID overhiring sprees and the end of the decade-plus “cheap money” era that had fueled the sector’s rapid growth through the 2010s. However, multiple reports have noted that Silicon Valley appears to also be getting jobs back as a result of the generative AI boom.

These converging trends raise broader questions for the region and its ability to create jobs and churn out innovative, hugely profitable technology companies. The most glaring of these is whether the AI subsector is creating enough tech jobs to replace the estimated half a million positions that have been lost to layoffs since 2022. 

A tale of two tech trends

As of now, it seems as though Silicon Valley is bumpily transitioning from the web era to the age of AI. While Bay Area tech companies are making decisive strides to snap up AI talent, it remains to be seen whether the region’s dominance over the past several decades will carry on into the next.

Citing newly revised regional job data from the US Bureau of Labor Statistics, the economics blogger Joseph Politano recently noted a sharp decline in California’s share of tech industry jobs overall, particularly in the subsectors of software publishing, computer system design, and web search.

San Francisco housing prices have plummeted due to waning demand, which may at least partly reflect shifting economic tides. At the same time, the fledgling AI boom appears to be driving enough economic growth in Silicon Valley to sustain a regionally hot real-estate market in nearby communities such as San Jose, Bloomberg reported in February.

Cache Merrill, founder of the global software development consultancy Zibtek and a recent Bay Area transplant to Utah, points out that the entire area surrounding Silicon Valley is “notorious for large up and down swings” in fortune. This makes it difficult to determine whether any local economic movements point to larger patterns outside the immediate region. 

However, Merrill agrees that AI is significantly reshaping the job market overall. “This AI-driven job boom is substantial,” he tells LeadDev. “It reflects a pivotal shift in the tech landscape from more traditional tech roles towards those requiring AI and machine learning expertise.”

That observation is borne out by recent hiring trends. “In the tech space, AI and machine learning engineers are seeing good [job] growth since last year,” notes Ger Doyle, the Jacksonville, Florida-based head of Experis North America, part of ManpowerGroup and one of the largest recruiters of tech talent in the US. 

Drawing from real-time ManpowerGroup data, Doyle says that the demand for AI and machine learning (ML) engineering roles has nearly doubled since May 2023. Additional data from Comprehensive.io suggests that much of the action is, indeed, unfolding on Northern Californian terrain. As of October 2023, the proportion of AI-related job postings for companies based in and around Silicon Valley added up to 59% – more than in every other American city combined.

“This trend is more than a spike,” says Doyle. “It indicates an industry in rapid expansion mode, desperate for skilled professionals who can navigate the complex landscape of AI.”

Others point out that the labor-market implications of emerging technologies are not always necessarily straightforward. “On the positive side, there is a strong demand for AI skills like machine learning and data science,” says Gauri Manglik, the Berkeley, California-based CEO and co-founder of Instrumentl, a grant-management platform for nonprofits. 

However, as Manglik sees it, the flip-side of this type of job growth is that those opportunities often remain clustered in tech hubs like Silicon Valley and neighboring San Francisco, which OpenAI president Greg Brockman declared “the best place to start an AI company” last year. 

“This concentration of opportunities risks leaving other regions behind,” Manglik says. By approaching AI as a generational opportunity for preserving its industry stronghold, Silicon Valley tech companies also threaten to absorb energy and resources that could be directed toward other promising technologies, both locally and elsewhere.

Merrill has a more optimistic view. He predicts that AI-related job growth could actually have the opposite effect on the geographic distribution of tech jobs, replicating and dispersing tech hubs across more expansive terrain.

“As AI technologies become more integral to different industries, the demand for AI expertise is going national and even global,” Merrill says. “Cities like Austin, Boston, and Toronto are becoming new hubs for AI talent, which is diversifying the geographic concentration of tech jobs.” This decentralization would also help mitigate the risk of regional economic downturns and support broader economic stability, Merrill suggests. 

What it would not do, on the other hand, is replenish the Bay Area’s share of tech jobs – a reality which some experts and local media outlets have confronted in unflinching terms. “There’s every reason to think [area tech companies’] workforces will never be as large, even if their market capitalizations continue to mushroom,” wrote San Francisco Standard business reporter Kevin Nguyen in March. 

Predicting the future of tech

Whether the AI boom will create as many new jobs as it renders obsolete remains an open question. According to a 2023 estimate by Goldman Sachs, a staggering 300 million global jobs across industries are currently at risk of being eliminated due to AI automation. 

Manglik points out that this has always been the labor-market effect of new technologies, from the elimination of manual pin-setters at bowling alleys, to the abandonment of secretarial typing pools following the spread of personal computers. Some jobs disappear, and others take their place. “The ultimate impact depends on how quickly workers’ skills can evolve,” she says. “There will be challenging transitions for some. Lifelong learning is crucial.”

Deborah Perry Piscione – the co-founder of Work3 Institute, a Silicon Valley advisory and research firm on AI and web3 technologies, and a co-author of the forthcoming Harvard Business Review Press title Employment Is Dead – notes that the majority of US workers are employed in occupations that did not exist in 1940.  

“I know there’s this enormous fear right now, but AI is going to help increase productivity,” says Perry Piscione. “The question is how much of that increased productivity can we all absorb?” 

In the near term, Merrill points out that the jobs being created by the AI boom require different skills than those lost during the recent ‘techcession.’ “While not a direct replacement, this shift is indicative of the tech industry’s evolution,” Merrill explains. “Where venture capital might be tightening, investments in AI are growing. For those able to transition or upskill into AI-related roles, there are abundant opportunities, although this also presents challenges for those whose skills are more aligned with traditional tech roles.”

An uncertain future

Many unknowns loom ahead. In spite of these lingering uncertainties, it’s increasingly clear that the sustainability of the AI job surge will depend on various factors, such as the pace of technological progress, the scope of regulatory decision-making, and economic tides. Less clear is whether Silicon Valley and the surrounding Bay Area will be able to maintain regional centrality in the industry it came to define. Signs are strongly pointing toward stiff competition elsewhere, in addition to broad and lasting workforce implications from the technology itself. 

Despite these unknowns, given the crucial role AI will almost certainly have in upcoming technological advancements, and its potential to bolster efficiency across sectors, it seems probable that the demand for AI expertise will not only endure but expand – in Silicon Valley, and beyond. Its promise for the local workforce, however, has yet to be fulfilled.