By Levi Sumagaysay, CalMatters
This story was originally published by CalMatters. Sign up for their newsletters.
In exchange for its embrace of Trump 2.0, Silicon Valley has received a grab bag of policies that some experts worry could hurt the U.S. tech industry in the long run.
On the one hand, corporate tax rates will stay low and the cryptocurrency and artificial intelligence sectors can count on less stringent regulations. On the other hand, tech companies are facing higher costs because of tariffs on many goods, the threat of 100% tariffs on semiconductors and new H-1B visa fees.
The tech industry has also agreed to unprecedented or highly unusual deals with the government: President Donald Trump said the federal government will get a 15% cut of the sales revenue from Nvidia and AMD’s chip sales to China; and the United States has taken a 10% stake in Intel.
The potential effects of this mishmash of policies have experts concerned about the nation’s long-term ability to attract top talent and lead the AI race. And the worries go beyond the tech industry: As a provider of jobs, innovation and tax revenue, Silicon Valley plays a significant role in California’s economy.
Now, “the valley has become more tense,” said Russell Hancock, the longtime president of Joint Venture Silicon Valley, a think tank whose board includes leaders from the public and private sectors.
Hancock said the Silicon Valley of old was “so amazing… ‘we (ate) gourmet food all day long at our workplace.’ ” Today, he said the valley is being “pummeled by inflation and wars and international instability.” Workers, many of whom have been ordered back to the office, are worried about AI making them obsolete, he said.
Then there’s the politics: the tech industry donations to the president’s inauguration, executives visiting Mar-a-Lago and tech CEOs accompanying Trump on his state visit to the United Kingdom.
“There is a new set of tensions between workers and management, with workers not necessarily on board with this rightward shift,” Hancock said.
H-1B visas
The Trump administration recently unveiled $100,000 fees on H-1B visa applications. Tech companies, including many in California, are some of the nation’s biggest employers of workers on the visas. The new fees are likely to hit smaller companies harder, because large companies that employ visa holders can afford to pay.
H-1B visas have long been controversial. Trump’s rationale for the new fees echoes complaints that companies use the visas to hire foreign workers to save money, taking jobs away from American-born workers.
“The large-scale replacement of American workers through systemic abuse of the program has undermined both our economic and national security,” the White House announcement said.
But some tech workers, like the Alphabet Workers Union, say immigrants are a “crucial” part of the industry, and are calling on Google parent Alphabet to protect them. Alphabet CEO Sundar Pichai is among the famous tech CEOs who were once H-1B visa holders, along with Tesla’s Elon Musk, Zoom’s Eric Yuan and Microsoft’s Satya Nadella.
“The gist of it is making sure workers are protected from these crazy and spontaneous changes that the Trump administration has been making,” said Olivia Asemota, a San Francisco-based software engineer who is vice president of the union. “We’re fighting for job security for all of us.”
Jeremy Liew is a retired venture capitalist who has invested in many startups, including Snapchat and Affirm, which went on to become big in social media and in financial technology, respectively. Born in Singapore, he was raised in Australia and eventually made his way to California.
“I’d like to think I was a positive in America from my time here,” said Liew, who lives in San Francisco. “I certainly know plenty of stories like mine,” he said, referring to people who helped start or fund companies.
Liew said he saw many immigrants working at startups, some of whom were likely H-1B visa holders — he never asked. He said he thinks the visa fees could have a negative impact on the U.S. tech talent pool.
‘Gangster move’
In April, the Trump administration banned American companies from selling AI chips to China, including modified chips that Nvidia had created in response to export controls under former President Joe Biden. Nvidia CEO Jensen Huang met with Trump a couple of months later, and in August, the Trump administration said it will be taking a 15% cut of Nvidia and AMD’s sales of AI chips to China.
“I said ‘If I’m going to do that, I want you to pay us as a country something,’ ” the president said.
There are few details about the legalities and how the arrangement will work. The U.S. Commerce Department has yet to issue a regulation codifying the arrangement, according to an August financial filing by Nvidia with the Securities and Exchange Commission. The department did not respond to CalMatters’ questions about the deal. Nvidia spokesperson Christina Spellman said she would have no comment.
AMD did not respond to CalMatters’ questions. On an earnings call in early August, CEO Lisa Su said the company was “working very closely” with the Trump administration as it sought to get its export licenses approved to sell chips to China, which reportedly have since been approved.
Many national security experts object to U.S. companies selling AI chips to China.
Dan’l Lewin, a former Microsoft executive and former CEO of the Computer History Museum in Silicon Valley, called Trump’s arrangement with Nvidia and AMD a “gangster move.”
“Long term I’m a reasonable optimist about good things coming out of Silicon Valley,” Lewin said. “But right now there’s a lack of oversight and rational industrial policy. Instead, we're at a gangster’s thug-like whim.”
That echoes the sentiment of other tech industry experts, though some are choosing their words more carefully.
Tariffs and other concerns
Ahmad Thomas is CEO of Silicon Valley Leadership Group, a tech advocacy group whose members include some of the valley’s biggest tech companies. Trump’s threats of 100% tariffs on chip imports for companies that don’t promise to “build” in the United States has been of particular concern for the group.
“Semiconductors are the backbone of the future of the AI economy,” Thomas said. “Unevenness with policies with such great economic value attached to them is challenging.”
Lance Hastings, CEO of the California Manufacturers & Technology Association, said “it would take years and years” to get to the president’s desired manufacturing-based economy, and would require a serious, long-term commitment to changing economic policies.
He is optimistic California ports will continue to move goods, though he predicted the president will continue using tariffs as “a negotiating tool” and the uncertainty around tariffs — which many businesses are concerned about — will drag on.
Gas, energy and food prices rose in August, along with other costs. Tariffs have had an uneven effect, with inflation further exacerbating inequality, the most recent economic indicators show.
Stephen Levy, economist and director of the Center for Continuing Study of the California Economy, a private research organization, said some tech industry workers are feeling the effects of other Trump policies besides tariffs.
“It’s hard for the tech economy to survive if the workers who are lower- or middle-income are losing their health care and nutrition, maybe their (Affordable Care Act coverage),” Levy said, referring to federal funding cuts for different programs.
Intel stake
The deal between Intel and the Trump administration, in which the federal government has taken a 10% stake in the company, is meeting mixed reviews.
It happened after Trump called on Intel CEO Lip Bu-Tan to resign, citing his investments in Chinese companies. Then, after Tan met with Trump at the White House, the president said that the government would buy almost $9 billion worth of Intel stock.
Sen. Bernie Sanders, the independent from Vermont, expressed support for the agreement, saying U.S. taxpayers deserve to get a return on their investment in companies.
But Sen. Elizabeth Warren, the Democrat from Massachusetts, has pressed U.S. Commerce Secretary Howard Lutnick for more details.
As part of the deal, Trump threw out some of the requirements Intel was supposed to meet under the Biden-era CHIPS Act. The government had already invested more than $2 billion in grants to Intel as part of that law, tying such grants to expectations that the company would build manufacturing facilities, also known as fabs, in a handful of states.
“The company no longer needs to invest in onshoring semiconductor production or build its previously planned fabs,” Warren wrote in a letter to Lutnick dated Sept. 3. “What is the American public getting from this deal? An extremely risky investment,” she added, pointing out that Intel’s stock fell 60% last year.
Intel’s financial filings about the deal say that the U.S. government’s stake in the company is passive, meaning that it will have no seat on the chipmaker’s board of directors. Warren also took issue with that.
Warren asked Lutnick for a response by Sept. 17. Her office did not respond to an email from CalMatters about whether she got answers to her questions. The Commerce Department did not respond to CalMatters’ questions about the senator’s letter. Intel spokesperson Sophie Metzger said the company has no further comment.
What’s next for Silicon Valley
Other Silicon Valley observers say tech leaders seem to think they’re just doing what they have to do to deal with Trump and his scattershot policies.
For example, Apple iPhones are exempt from tariffs because CEO Tim Cook has cultivated a relationship with the president and promised a $100 billion investment in U.S. manufacturing.
“I think their initial reaction is simply ‘How do we mollify and pacify this guy?’ ” said G. Pascal Zachary, a former professor, tech journalist and author. He said tech executives risk “repelling” employees who may be put off by Trump. Combine that with the new H-1B visa fees — which he said “sounds like a shakedown” — and limiting or canceling student visas, and it raises questions about the future of a workforce that has helped propel the U.S. tech industry to dominance.
“International talent is crucial,” Zachary said.
Lewin, the former Microsoft executive, feels the same. He believes Canada and Europe will benefit from the U.S. driving talent away.
“We will lose (international) students’ financial contributions, their IQ and diversity in the room(s) that stimulates invention,” Lewin said.
Along those same lines, Stanford University professor Mark Lemley said he thinks Trump’s policies will drive tech companies to hire foreign workers outside the United States.
Lemley is also an intellectual property lawyer who in January declared that he fired Meta as a client because of CEO Mark Zuckerberg’s support for Trump, and what he called “Facebook’s descent into toxic masculinity and neo-Nazi madness.”
“The smartest people in the world all came here to go to school, they stayed, they started companies,” he said. “And the idea that we are doing everything in our power to discourage that, to tell people to go home because ICE might come after you … stay home, you can't have a visa … that's going to be corrosive.”
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
