How NYC Became an AI Industry Hot Spot

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When the events company Society 32 decided artificial intelligence represented an area ripe for the kind of conferences it puts on, it held one in Silicon Valley. It tried one in Austin. But then it decided New York was where it had to be.

This December, its ninth New York AI Summit, to be held at the Javits Center, is expected to attract 4,000 attendees, up 15% from last year, as technologists and executives from a wide range of industries try to figure out how AI will affect their businesses.

“We’ve landed in New York because it’s a tech hub, a major center for AI innovation and investment and it’s got a diverse range of industries that are rapidly adopting AI,” said Caroline Hicks, senior events director.

The AI Summit is just one example of how New York is emerging as the nation’s second most important center for what is known as generative AI — which involves systems that learn to form new content by identifying patterns, producing human-like interactions.

The city boasts scores of startups, big tech companies like Google are centering much of their AI research here and universities are deeply committed. In addition, the administration of Mayor Eric Adams is trying to claim for New York the mantle as the most aggressive city implementing AI, although it has had some stumbles.

The upshot is that AI is giving a supercharged boost to the city’s tech sector, whose 225,000 workers are now more than work on Wall Street, and whose average $150,000- a-year paychecks account for 10% of all the income in the city.

“While the Bay Area has been a leader in advancements in generative AI and large language models at the heart of artificial intelligence, New York City is rapidly becoming the world’s capital for applied AI that is focused on real-world applications,” said Andrew Kimball, chief executive of the city’s Economic Development Corporation. “Like the early days of the tech boom, AI is driving innovation across New York City’s industries from finance to biotech and health care, to the green economy.”

While there hasn’t yet been an in-depth study of the growth of AI companies and jobs in the city, some data points suggest it has been expanding rapidly:

• Venture capital investment in New York in the second quarter increased to $7.7 billion, a 73% jump from the previous year, with much of the money going to AI companies like Evolutionary Scale, which is applying AI to therapeutic design, and SmarterDx, whose AI technology helps hospitals win more money from insurance claims.
• Last year, the city ranked behind only San Francisco and San Jose in job listings for generative AI jobs, according to a Brookings Institution study.
• OpenAI, which created the widely used ChatGPT chatbot that allows users to have human-like conversations and compose letters, essays and write computer code, is already hiring people in New York and is seeking space to open an office here, its first in the U.S. outside San Francisco.

Strength in Diversity

New York City’s bright prospects as an AI hub are based on three fundamental strengths.

Its pool of the talent needed for AI work is unmatched. Wall Street quants — who combine their skills in finance, math, and computer software to analyze and predict markets — and data scientists in companies and educational institutions are itching to apply their knowledge to AI.

Sarah Nagy started out as an astrophysicist and then moved to Wall Street as a quant for Citadel, the fifth largest hedge fund in the world, before founding Seek AI in 2021 because she saw how businesses struggled to efficiently crunch enormous amounts of data.

“I realized that the model Chat GPT was building showed that a lot of repetitive work was going to be done by AI and I wanted to be the one to build that model for businesses,” she recalled. “So that was what inspired me to quit my nice hedge fund job,” she said.

According to EDC, there are 40,000 people in New York like Nagy with direct AI experience or who work in jobs where the skills are transferable.

In addition, data scientists and researchers spread throughout the city’s broad business ecosystem are positioned to bring AI to the industries they work in and to find the people they need to help them.

After graduating from medical school, Michael Gao came to New York for his residency at New York-Presbyterian and stayed on as an in-house physician for patients at the hospital. He saw first-hand the complex care many patients received from numerous departments and specialists and how hard it was for the hospital to provide an accurate account for insurance reimbursement.

Since he had also taken a lot of applied math courses as an undergraduate, he thought he could use AI to solve the problem.

He founded SmarterDx in 2019 by convincing two friends, one of who had been an engineer for the Department of Defense and another who was director of quant engineering at Citi, to quit their jobs to join him.

“I think when you start a company in the early days you are saying to people, ‘Hey do you want to come work for free’,” he said. “I think the advantage of New York is that it is truly cosmopolitan with respect for talent. If I hadn’t been in New York City I would have never met them, and this idea wouldn’t have been possible.”

After a hiatus when he went back to the hospital to help with COVID patients, SmarterDx’s AI system is now in use in 15 hospital systems helping them catch errors in insurance submissions.

But the city’s paramount attraction for AI companies is that no city offers a more diverse set of industries and businesses that need to adopt AI to remain competitive.

Alex Sambvani was beginning to use AI as a data scientist at the online music company Spotify providing personalized lists of music and podcasts for subscribers when he realized AI could help small businesses like the hair salon his aunt owned.

For years he had heard her complain that it was so difficult to deal with phone calls from customers. The hairdressers couldn’t take the calls when attending to a customer and hiring a receptionist was expensive. So, he and his co-founders developed an AI-based tool that could have a conversation with a customer and book or change an appointment.

“It worked about 60% of the time,” he said.

With a working prototype, he looked for an attractive industry to concentrate on and decided on restaurants.

“Restaurants receive a high volume of calls, struggle to deal with them and don’t answer 50% of them,” he added.

Its tool, called Slang Concierge, can not only book or cancel reservations, it can also understand questions and answer them like a human would — such as “Do you have gluten-free items?”

“I love New York and I don’t want to live anywhere else,” he said. “But New York is our biggest market,” with many of its more than 20,000 restaurants as potential customers.

And when the company moves on to building similar tools for other sectors, New York will have the customers it needs, he added.

Local Leaders

The city’s strengths extend to both its established tech companies and its universities.

AI experts say Google and Meta, owner of Facebook, have centered much of their AI work in their substantial New York City offices.

Google, the city’s largest tech company with 14,000 employees based in its lower Manhattan offices, wouldn’t disclose the amount it is spending on AI research in New York or the size of its team but said the office is involved in work on its Gemini and DeepMind projects, rivals to Chat GPT, and projects employing AI in health care and education.

Fundamental research is centered at universities like Cornell Tech and NYU, though the city is also home to Hugging Face, a Brooklyn-based company that has raised $400 million for its platform which allows users to build, train, and deploy models using machine learning.

AI is the top priority at Cornell Tech, and NYU says it is upgrading its computer infrastructure, expanding its course offerings and seeking partnerships internationally, inking a partnership with the Korean Advanced Scientific Institute to expand AI research.

At the same time, the administration of Mayor Eric Adams is trying to stake a claim that it is the leader in the United States in embracing AI to improve local government. 

Its first major effort, MyCity Business, was launched in September and embarrassed the Administration in the spring when the Markup showed that it was giving wrong answers, including some that suggested businesses take illegal actions.

The misstep shows that the public tends to hold governments to a higher standard than private companies in an era of innovation and experimentation.

“When you do a startup you’re just making a thing and if it works for some people great and if doesn’t work for everybody that’s fine too,” said Rumman Chowdhury, founder of the AI-focused nonprofit Humane Intelligence and a member of the Adams administration’s advisory committee for how to use AI in city government. “That’s not how it needs to work in the public sector where it needs to work for everybody.”

The bot has been improved, however. It has been used by more than 19,000 people since its launch and has won over some business people, including Shaw-nae Marie Dixon, who found it crucial to getting all the inspections she needed to open her soul food Shaw-nae’s House on Staten Island, especially the crucial fire department inspection.

“When I called for information, my calls were never answered,” she said. “But when I used the chatbot to schedule inspections people showed up right away. It was a miracle compared to using 311.”

She’s now telling her colleagues to use it to deal with the myriad of city regulations needed to open a restaurant.

With Adams’ embrace of AI, the city was the first in the country to adopt an AI action strategy, which set an agenda of 37 steps that centers on guidance to agencies on how to adopt AI tools and formed an advisory committee.

But the advisory committee is just getting started and city agencies are just starting to receive guidance on how to implement AI.

The current AI craze could turn out to be a bubble. New York’s first tech boom in the 1990s failed to create viable companies and most disappeared when the bubble burst in 2000, just as they did in Silicon Valley.

AI startups, including all those whose founders were interviewed by THE CITY, are not profitable and are not planning to be for years while business ramps up. New York funders tend to be more focused on the need for profitability than their West Coast counterparts, said Greg Morrisett, dean of Cornell Tech.

And with the cost of living so high, especially for young people, the lure of less expensive cities will always exist.

But déjà vu is the more likely outcome. “It’s just the whole tech story all over again,” said Morrisett. “The basic science is done elsewhere, and you come to New York to commercialize it.”