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San Jose becoming hub for artificial intelligence firms

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This post summarizes the article by Ethan Baron published on May 28 in The Mercury News.

SAN JOSE — Cheaper and older isn’t typically associated with riches and success in the Bay Area tech scene.

But that’s just what San Jose is offering — cheaper office rent and older tech workers — to a rapidly expanding cohort of companies focused on artificial intelligence, the explosive new frontier in tech.

“San Francisco has the gamers, we have the grownups,” said San Jose Mayor Sam Liccardo. “We’ve got a very rich pool of talented, skilled workers.”

Much of Silicon Valley has seen skyrocketing tech growth, driven in large part by an army of young engineers, developers and entrepreneurs. San Jose, which had built up its cred as a tech hub in the ’80s and ’90s on the strength of chip firms such as Maxim, and Cypress Semiconductor, has seen its star eclipsed by the booming innovative tech giants on the Peninsula. But now the city is fast becoming a capital for artificial intelligence, thanks to lower costs and a more mature and experienced army of its own: older, established tech workers with the required deep skills for AI development.

Artificial intelligence — which can be broadly interpreted to include machine learning and the “deep learning” technology that resembles human thought — is widely seen to be as revolutionary as the internet and mobile phones. By 2035, AI is expected to add $8.3 trillion to the U.S. economy, boosting America’s annual growth rate to 4.6 percent from 2.6 percent, according to a September report from Accenture.

“It’s a core ingredient that’s found in so many companies today,” said Pravin Vazirani, managing director at Menlo Ventures. “These companies are discovering there’s a lot of talent in the area — the rise of machine learning technologies is sort of correlated with the rise of San Jose.”

Because many AI jobs involve technology of extreme complexity, companies working with AI say San Jose’s generally older, more experienced tech workforce — and lower business and living costs than in other Bay Area tech centers — make the city a desirable location. More than 20 AI firms are now headquartered in the South Bay city.

“It’s got a lot of good technologists — the type of people who really help you build deep-technology companies, not just another app for the app store,” said Rajesh Ramanand, CEO of Signifyd, a machine learning-based San Jose fraud prevention firm.

Access to a pool of established tech workers can also bring workforce stability, Vazirani said. Still, he added, because San Jose is “not as central” as other Silicon Valley cities, luring workers to San Jose can pose challenges.

When tech firms decide on locations, they primarily consider access to technical talent and the costs of office space and housing, said Colin Yasukochi, director of research and analysis at commercial real estate firm CBRE. San Jose’s average commercial rent of $38 per square foot is about half as expensive as San Francisco’s, and considerably less than rents of around $90 per square foot in Palo Alto and Mountain View, Yasukochi said.

And office vacancy rates are higher in San Jose than in other tech hotspots — about 11 percent compared to single digits in Palo Alto near Stanford University and 6.5 percent in San Francisco, Yasukochi said.

“San Jose is still a very well-occupied market but it has more than some of these markets that are very supply constrained, and that’s why rates there are still more attractively priced,” Yasukochi said.

Those lower costs mean the city provides room to grow, said Mihir Shukla, CEO of Automation Anywhere, a process-automation firm built on AI.

“Being the largest player in the space, we needed a space that we could scale our headquarters so it could be hundreds or thousands of people,” Shukla said. “Economically ,it was more viable to scale at that size in San Jose.”

Since many tech workers with AI expertise have families, San Jose offers amenities that are more expensive to the north, said Shukla, who has children.

“Three kids, you need a backyard and a nice school and a peaceful life,” Shukla said. “You go to the (San Francisco) to have fun and to do various stuff, but for us, not to live.”

For San Jose officials, local AI firms hold the promise of contributing to a better urban life.

“We are trying to engage many of these companies with those applications of AI that have civic impact, notably in autonomous vehicles where we’ve hosted several meetings with industry leaders to discuss how San Jose could be a platform to demonstrate and test their technology,” Liccardo said. The city will soon put out a call for proposals to test robot vehicles in several downtown corridors, including between Diridon Station and the San Jose airport, Liccardo added.

Already, having the Diridon transit nexus near downtown makes it easier for AI firms to attract talent from the Peninsula and San Francisco when jobs can’t be filled locally, said Tessa Lau, chief technology officer at Savioke, which makes its AI-powered service robots at its facility on Market Street.

“A large number of our employees take the Caltrain to work,” Lau said.

Also, the presence nearby of the “MAE-West” data center, the massive, business-focused internet hub on Market Street also known as the Gold Building, has been a boon to Savioke, whose robots are networked in the cloud, Lau said.

As AI companies move into the city and expand, the industry is starting to generate its own ecosystem and knowledge base. Fast-growing chipmaker NVIDIA is headquartered in Santa Clara, but it’s in talks with San Jose State University to develop a program for teaching AI skills.  NVIDIA has a “deep learning institute” to train software developers, and is now looking at extending that education in some form to college students.

“We’ve just started discussions with San Jose State to figure out how we can we take the curriculum that we have and bring it either to get tightly integrated with their curriculum or as a starting point to get their students to have exposure to this leading-edge training that we’re doing around artificial intelligence,” said Greg Estes, NVIDIA’s vice-president of developer marketing.

To Menlo Ventures’ Vazirani, San Jose’s AI scene appears destined for considerable expansion.

“It absolutely is self-perpetuating,” Vazirani said. “The first generation of companies gives rise to the second, gives rise to the third. That is a virtuous cycle.”

Sourabh Kothari

Sourabh Kothari

Sourabh is the former Director of Merchant Advocacy at Signifyd, where he brought over 18 years of experience defining, designing and delivering content through stories, events and video.