Tech giant Nvidia’s stock value has seen meteoric growth—climbing about 190 percent and accounting for about one-third of S&P 500 gains over the past year—and California’s revenues are exceeding expectations as a result, but analysts warn that relying on high tech and the AI industry is leaving the state vulnerable to market fluctuations.
Revenues exceeded expectations by $7 billion compared with June forecasts, though the nonpartisan Legislative Analyst’s Office cautioned the gains are “on shaky ground” in an annual fiscal outlook released Nov. 20.
“While of course the revenue recovery rebound we’ve seen since the June estimate is favorable, because it rests upon stock market appreciation, that to us feels more precarious than if it were built upon more broadly based job growth in the state [and] consumer spending,” legislative analyst Gabriel Petek said during a press conference announcing the report. “When it’s based on the markets, the market sentiments can change quickly, very quickly. It’s very unpredictable.”
Bonuses and stock option compensation at four companies—Nvidia, Apple, Meta, and Alphabet—accounted for nearly 10 percent of California’s total income withholding tax collected in the first six months of 2024, according to the report.
A market correction in Nvidia’s stock price could lower state revenues by as much as $3 billion, deputy analyst Brian Uhler said during the press conference. […]
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