There are 45 miles between the two great engines of tech development in California, Silicon Valley, and the City of San Francisco. They are linked by two main routes: Highway 101 and Interstate 280.
Silicon Valley is home to many of the legendary names of the tech industry, including Intel and now NVIDIA, both based in Santa Clara. San Francisco is home to OpenAI, a renegade start-up that is already synonymous with the Generative AI revolution.
The new AI age is largely centred on the Valley and San Francisco, and features OpenAI, Alphabet, Apple, NVIDIA, Meta, Anthropic, and the high-octane AI activities of OpenAI’s Redmond, Washington State-based investor Microsoft. OpenAI recently instituted a $6.6bn funding round, which values the AI start-up at $157bn.
Silicon Valley’s “secret sauce”
Late in World War II, Stanford University provost Fred Terman created and ran an expanded engineering faculty at the university, encouraging graduates and faculty members to form new companies. Two of those that did so were Bill Hewlett and Dave Packard who developed an audio oscillator in Dave’s garage with a loan from Terman. HP was the original Silicon Valley stalwart.
Why was it called ‘Silicon Valley’? Because William Schockley, co-inventor of the first working transistor set up Shockley Semiconductor in the Stanford Industrial Park to make the transistors and chose silicon over germanium to do so.
It was the Apple IPO in 1980 that truly put Silicon Valley on the map, with Steve Jobs and Steve Wozniak having built their first PC in Jobs’ family garage. There is something about Silicon Valley and garages!
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Then in 1981, the IBM PC, then, despite Apple, the dominant PC company, chose Intel as its processor chip provider.
Silicon Valley had arrived. Its unique tightly-knit amalgam of academia, venture capitalists, specialist lawyers, a pervasive risk-taking meritocratic culture, fearless serial entrepreneurs, proximate US government research, local laws and regulations encouraging business formation, and sunny weather turned it into the world’s entrepreneurial hotspot, where the most important law was Moore’s Law, hatched by Gordon Moore at Intel. It decreed that the number of transistors in an integrated circuit (IC) roughly doubles every two years, and it enabled a sequence of revolutions that Santa Clara was integral in turning into major industries: PCs, the web, smartphones, and now the new AI era.
What is the “secret sauce” of Silicon Valley’s success? In the words of veteran Valley-based forecaster and Stanford professor Paul Saffo, it is that ”we know how to fail…failure is the foundation of innovation.’.
It is an idea that NVIDIA chief executive Jensen Huang has also espoused. He says he wishes young and promising tech entrepreneurs and staffers lots of pain and suffering.
The world’s technology and wealth capital
Silicon Valley remains the home of many of the world’s key movers and shakers. The market capitalisation of Californian tech companies is estimated to fluctuate currently within a $14tn to $15tn range, roughly half of that of the Nasdaq, and a third of the Dow Jones Industrial Average, a stock market index of the 30 most prominent companies listed on stock exchanges in the United States. Meanwhile, it is estimated that over 40% of US venture capital start-up funding happened in the Valley along the legendary Sand Hill Road in Q1 2024.
That is not to say that Silicon Valley does not have its challenges, such as soaring home prices and rents amid a reduction in housing permits. The median home price is $1.7m against an average Valley income of $189,000 among a 107-million strong workforce.
Silicon Valley is not the only technology-led powerhouse in the US. Just up the West Coast in Washington State is Seattle, the home of Microsoft and Amazon. There is also the area around Route 128 near Boston, and Texas is now attracting several companies that might have previously resided in California, such as Oracle, HP Enterprise, and Tesla. Oracle, however, is not staying too long in Texas. It now wants to move from Austin to a new world headquarters in Nashville, Tennessee. But these examples are not remotely of Silicon Valley’s scale and influence. The only international counterpart to Silicon Valley might be China’s Shenzhen Special Economic Zone.
Whichever of those two famous routes, ‘101’ or ‘280’, you take in Northern California, it is almost certain your final destinations will be the twin towns of Money and Innovation, though you won’t actually find them on the map.
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