How we get a tech future for everyday Californians
Californians are eager to see technology solve pressing social challenges and deliver real benefits for people’s lives. But instead of tackling the real problems Californians want solved, AI is largely making them worse—from housing to healthcare.
Why? In part because over the past two decades, our regulatory environment has allowed a few large technology companies to gain unchecked power over the tech ecosystem. This means that instead of competing with Big Tech firms, AI start-ups depend on them for resources, growth, and even survival—thereby hampering innovation and driving up prices.
At the same time, California’s overreliance on gains from a handful of companies jeopardizes the stability of our state budget and the pocketbooks of millions of Californians who never agreed to this gamble.
To create a future centered on improving everyday people’s lives, we need to build an innovative tech ecosystem that enables all companies to compete on their merits and to build products that deliver widespread social benefits. We detail how California leadership can do this in a memo we authored with AI Now, “Beyond Big Tech: An Alternative Vision for California’s Tech Economy.” These are the main takeaways.
What’s at stake?
The internet gave rise to entirely new economies and massive economic growth because it rested on a base layer of technology developed at public institutions. AI is being developed entirely by a tiny handful of massive companies that threaten to eat all the benefits that may flow from it. The result: a product ecosystem driven by an almost-singular view of the future and motivated by profit, rather than one filled with innovations that could tackle our biggest issues, like climate change and cancer.
Big Tech companies are exploiting their monopoly positions to further entrench power and prosperity in the hands of a few. They control the resources necessary to enter the AI market—such as cloud computing or chips—making it difficult for startups to get off the ground in the first place. They also control access to consumers. For example, Google is able to push its generative AI products into existing products like Search. A new entrant may find it all but impossible to compete with entrenched players who can easily integrate AI into existing products—whether customers ask for them or not. The current financial and funding structures, such as venture capital (VC), reward and perpetuate this behavior.
Lack of competitive pressure does not fuel innovation: it stalls it. With researchers dependent on major AI companies for the tools and computational power needed to be on the cutting edge, academic independence is sacrificed. For example, Google has stalled the publication of new technical AI research that could theoretically be used by competitors. We are notably losing out on research targeted at the public good, as more and more critical AI research is taking place in private companies’ labs. For research in the private industry, the development of AI has centered on the idea that scale is the only path to progress. As a result, Big Tech is consuming an unsustainable amount of resources and training data without regard to ownership and privacy.
Big Tech’s dominance threatens California’s fiscal and economic stability, putting everyday people at risk. In 2024, it was widely reported that a single company—Nvidia—was suspected of playing a major role in closing California’s budget deficit. The gains attributed to AI firms’ soaring—but unstable—valuations are masking an otherwise bleak economic picture. In the event of a market correction, California’s budget crisis could turn catastrophic. We need a tech economy in which competition thrives, and many companies can take root and grow, so the failure of a few overleveraged giants won’t tank everything.
A roadmap for prosperity in the age of AI
California benefits when its people have the opportunity to turn their vision and ambition into reality. But innovation only thrives in competitive markets. When no single player dominates, new ideas and opportunities have room to emerge—and the economic benefits are shared beyond the hands of a few powerful companies. Achieving that future is up to the state’s new leadership.
Foster competition to unleash real innovation
To harness the full potential of AI and emerging technology, California must take bold steps and establish brightline rules to create a competitive ecosystem for its businesses, workers, and consumers. This includes:
- Updating California’s Cartwright Act to address single-firm conduct: Single-firm conduct is when a company uses its size and market power in an anticompetitive manner, such as by unfairly excluding rivals or undermining competitors. The federal government and over 40 states have laws around single-firm conduct in their antitrust laws, but not California. According to a multi-year study from the California Law Review Commission (CLRC), this is a huge flaw in California’s existing laws. As part of their findings, they recommended rectifying this by adding a single-firm conduct section to California’s major antitrust law, the Cartwright Act.
- Investigate and enforce robust merger review to scrutinize mergers, acquisitions, and partnerships, including those involving Big Tech hyperscalers. Reviews should also examine potential conflicts of interest involving board members of companies who are also board members of other Big Tech firms and AI startups, as well as how companies acquire datasets from one another to train AI systems.
- Pass bright-line rules to prohibit anti-competitive market behavior before it can occur. To prevent the concentration of power in a small number of dominant technology companies from distorting the market, California must investigate potential competitive harms and create bright-line rules around AI partnerships and investments, self-preferencing, and blocking rivals’ access.
- Build a genuinely pro-competitive economy in California using a full toolkit—not a single lever. That means ensuring that workers, consumers, and businesses each have meaningful, accessible rights to bring complaints, raise concerns, and pursue legal action when market power is being abused. It also means robustly funding the California Department of Justice with the talent, resources, and clear mandate to hold companies accountable.
Build anew
So what could AI look like if it were guided by public interest objectives, freed from private industry’s dominance over the AI stack? We already have some of the tools to do that.
In 2025, California passed a law mandating the development of CalCompute, a publicly owned and operated cloud computing cluster within the University of California system that fosters “research and innovation that benefits the public.” But we need to keep going and:
- Invest in public AI infrastructure and alternative research trajectories that reduce dependence on Big Tech infrastructure. California should fully fund CalCompute to provide affordable AI compute resources for small businesses, researchers, and startups.
- Launch a California “Grand Challenges” program that directs AI towards public missions, defining a series of public benefit objectives that are set by the public, and thus mobilizing public resources to drive technological breakthroughs that tackle the toughest challenges facing our state.
- Place enforceable, binding conditions on all public AI investments, like tax breaks for data centers, to hold them accountable to public-oriented goals. These include enforceable limits on resource use to curb the harmful environmental effects of AI and ensure that structurally disadvantaged groups have deliberate authority over the development of public infrastructure.
Catalyze innovation
California can also publicly finance private development in alignment with the state’s values and priorities. The VC system hunts almost exclusively for startups that can return billions, not companies that do something for the public good or fill a niche in a way that makes people’s lives better. The California Infrastructure and Economic Development Bank (IBank) established the Expanding Venture Capital Access in 2021 to do just that.
While the VC Access Program is a promising effort, it can be leveraged to catalyze more private capital to seed a robust innovation ecosystem. California leadership can direct the IBank to:
- Expand the VC Access Program to include later-stage companies. Elected leaders should consider increasing the capital allocated to the VC Access Program to fund startups beyond their earliest stages.
- Evangelize its success to attract private investors. The next Governor should direct GO Biz to develop partnerships that can amplify the VC Access Program’s learnings and successes to socialize a broader set of methodologies for investing in innovation.
- Leverage the state’s assets to fund more sustainable growth. In addition to being a fund manager itself through the VC Access Program, the State of California is also an institutional investor in many private VC funds. While many of these institutional funds are not managed directly or indirectly by elected leaders, elected leaders can use their leadership to encourage these institutional fund managers to adjust their thinking.
The opportunity ahead
Throughout history, our government has driven technological breakthroughs by setting ambitious targets for our most pressing challenges—from the federal government’s formation of the Advanced Research Projects Agency in 1958, which became the backbone of the early internet, to the National Institute of Health’s sustained funding for exploratory medical research that delivered the mRNA vaccine when we needed it most.
These public investments for the public good have produced some of the most impactful scientific advances of the last century. If we want AI to unlock the same broad-based dynamism the internet once did, we need policy that puts society’s needs first—not the balance sheets of a few tech companies.
To learn more, check out our memo “Beyond Big Tech: An Alternative Vision for California’s Tech Economy.” This memo is part of TechEquity’s California’s AI Future series, which includes three other memos addressing the political dynamics of AI in California, how AI usage is making California less affordable, and an alternative vision for California’s tech economy.