California-based companies have announced a record haul in startup funding, despite billionaire-tax fears. California is in the midst of a record-shattering investment wave, fueled by the artificial-intelligence boom in Silicon Valley. Companies based in the Golden State have drawn around $366 billion of venture capital since the beginning of the year, according to data provider Pitch Book. That's more than three times the amount of venture funding that has gone into the other 49 states combined, and nearly double California's previous record, set in 2025.

New York state ranks a distant second in venture-capital investment, with $27 billion in deals announced so far this year. California's funding keeps coming despite the threat of a billionaire tax that detractors, including Gov. Gavin Newsom, have warned could scare off investors.

The capital pouring into AI has supercharged housing prices in San Francisco and created a new class of millionaires overnight. But the boom is reverberating beyond the tech-centric Bay Area: the money has also helped ease the state government's chronic budget deficit by helping push income-tax revenues well above forecasts. In May 2025, California's finance department projected $126 billion in personal-income tax revenues for the fiscal year that ended June 30. Actual income taxes instead generated around $147 billion, as AI enthusiasm fueled a soaring stock market and boosted compensation for tech workers.

The windfall hasn't solved California's long-term budget challenges but has given state leaders some unexpected, near-term flexibility. The state was able to sock away more money in reserves and spend more on education, which is required to get a certain share of revenues. The extra tax revenue also gave the state additional wiggle room as it funded discretionary items ranging from new courthouses to litter abatement.