Newsom's Silicon Valley Dilemma Comes To A Head: Friend Or Foe?

In his two terms as governor, Gavin Newsom has threaded the needle with California’s booming tech sector.

That approach could be put to the test in his final months as governor.

Neither an unabashed ally nor outright antagonist to Silicon Valley, Newsom has given the industry wide berth to innovate and grow, a posture that’s helped fuel billions of tech tax dollars into Golden State coffers. In some cases, he’s stepped in to put guardrails on the tech industry, as fears have risen around social media and artificial intelligence.

Now, with a set of Democrat-led bills potentially headed to his desk that would slap tougher regulations on the sector, Newsom faces a choice: Try to stick to the middle path or take a more decisive stand for or against the industry.

“August into September could be the most consequential period of his tenure,” John Bennett, executive director of the nonprofit California Initiative for Technology and Democracy, said in an interview. “What he accomplishes in 2026 [could] define him in the next two years.”

The stakes are high for the ambitious Democrat, as he eyes a presidential run in 2028 after years climbing the ranks of the party establishment: Vetoing the tough regulations, should they reach his desk, could motivate deep-pocketed tech leaders and their companies to fund his political ambitions. But signing some of them would put him at odds with powerful labor unions — and muddy a populist message on tech that Newsom is working to cultivate.

The bills advancing in the California Legislature, which are largely opposed by tech associations, include measures that would require tech giants to prevent AI chatbot content that could encourage self-harm among users, while protecting children’s data and requiring controls and audits. A social media measure would ban addictive features for users under 16.

Another set of workforce measures would require human oversight of AI in clinical care, improve how the state gathers data on AI’s impact on workers, and expand notices to employees when automation contributes to layoffs. All are facing final votes in legislative committees in August. From there, they would head to floor votes and then onward to Newsom.

“This session will demonstrate whether or not he can successfully point to his record,” said Sacha Haworth, executive director of the progressive advocacy group Tech Oversight Project. “When we talk about whether his record will stand up to the rhetoric, you have to look at the strength of the bills that he signs into law.”

The advancing bills could spell trouble for the tech sector. Robert Boykin, a lobbyist for the industry group TechNet, warned that the chatbot measures in particular “risk fragmenting the regulatory landscape as similar requirements emerge in other states, making it harder for AI developers to build consistent, nationwide products.”

Influential Democrats in Sacramento are hoping Newsom delivers. Assemblymember Buffy Wicks, an author of the chatbot legislation and chair of the powerful Assembly Appropriations Committee, called Newsom “a tremendous leader as it pertains to kids' online safety.” If he signs her measure as it stands, it would set a national standard for AI chatbot guardrails at a time when an avalanche of private lawsuits and state investigations are alleging the bots have led to the deaths of young people across the country.

Given those investigations, Newsom will “probably have an easier time signing some of these” chatbot bills, said Adam Thierer, a tech policy expert at the center-right R Street Institute think tank, adding that “it won't be held against him in a year or two” by the tech sector.

On new social media rules, Newsom has signaled a willingness to act, calling earlier this yearfor limits for kids under 16 even before a bill on the issue was released.The bill’s author, Long Beach Assemblymember Josh Lowenthal, said Newsom’s early support “opened the door for us to work with key stakeholders that may not have engaged so forcefully in the absence of knowing where the governor is going to stand.”

The governor has taken a more nuanced approach on workforce issues, previously rejecting some labor-backed bills while pushing for new policies to help people reap the benefits of the lucrative AI sector.

With recent polls showing Americans are increasingly fearful AI will cause widespread job loss, Newsom has voiced support for a public equity fund for AI companies, which could pay for workforce retraining and other programs. Newsom also recently unveiled a database to track AI-fueled job loss trends and issued an executive order to prepare workers and businesses for potential AI disruption.

“No Governor has been more out front on AI policy than Governor Newsom,” Newsom spokesperson Tara Gallegos said in a statement. “Through the Governor’s work, California is advancing first-in-the-nation actions to protect Californians while allowing this technology to grow responsibly.”

But that balancing act has left some organized labor advocates — a key Democratic constituency — dissatisfied, arguing Newsom has missed opportunities to crack down on an AI sector they believe poses serious threats to U.S. jobs.

“I think he’s trying to catch up and make himself sound palatable to Americans, especially working-class Americans,” said California Federation of Labor Unions President Lorena Gonzalez. “He knows he has to move especially on the workforce issue and has been trying to say he’s coming out with these grand plans.”

Last year, Newsom signed a landmark AI bill authored by state senator and congressional hopeful Scott Wiener, SB 53, that requires frontier AI companies to report critical safety incidents and publish plans on mitigating catastrophic risks. His office was engaged in brokering agreements as the final bill neared his desk, and despite some behind-the-scenes grumbling no major AI labs came out against it.

The legislation went on to have national impact, with a similar measure passing in New York and the Illinois version ultimately drawing support from leading AI companies like OpenAI and Anthropic.

Newsom has also been willing to sign boundary-pushing tech measures to limit election deepfakes, verify kids’ ages online, crack down on sexually explicit deepfakes and strengthen data privacy protections.

But amid California’s AI boom, Newsom has also spoken about the importance of protecting the state’s innovation engine and has been careful to keep the industry in the fold. In moves celebrated by industry, Newsom vetoed a more aggressive AI bill in 2024 and refused to sign labor-backed bills going back years that would ensure truck drivers remain in the cabs as autonomous technology advances. The state’s Department of Motor Vehicles under his administration has approved regulations allowing self-driving big rigs to test on public roads, with California the only state that previously forbade it.

“Gavin’s always been a friend to tech but he’s also been a proud check on tech,” said a top Silicon Valley political fundraiser who was granted anonymity to speak freely.

The governor’s boosters say he acts when a proven harm must be addressed and is able to work out solutions that companies often can accept, if at times begrudgingly. And while Bennett and some other advocates said they wish Newsom had made regulating tech more of a priority while in the governor’s mansion, Jason Elliott, a former adviser, took issue with that characterization.

“I think the governor can walk and chew gum and hula hoop and throw 90-mph fastballs” at the same time, he said, pointing to other states following California on tech policy.

Hanging over Newsom’s final session as governor are his presidential ambitions. He’s out on the road in swing states including Nevada, a must-visit state for White House aspirants, and some tech figures, like crypto billionaire Chris Larsen, say they’ll back him for president. A muscular third act on tech regulation could potentially imperil those endorsements.

And with a Democratic Party increasingly backing progressives, it’s an open question whether Newsom will be able to make the case to voters that allowing the tech sector to thrive, while checking some of its threats, is the best approach.

“I think that there will be people to the left of him that will paint him as the best buddy of the tech industry,” said Neil Chilson, head of AI policy at the conservative-leaning Abundance Institute. “From the more right-of-center and pro-tech side of things, he's not seen as an ally.”

Tyler Katzenberger contributed to this report.