Wall Street’s AI windfall props up NYC’s budget, and the dot-com bust is a warning

Wall Street profits tied to artificial intelligence now hold up a large share of New York City’s economy and budget. City Comptroller Mark Levine said most residents do not see how close that link is. The collapse of the last tech boom in the early 2000s shows how quickly a windfall like this can turn.

Hundreds of AI startups have come to New York, drawn by its huge talent pool and its standing as a global business center, and many of them have settled in Midtown South. Anthropic and OpenAI, the two most important players, are expanding offices here that are likely to be their biggest outside their San Francisco headquarters.

How AI profits prop up the NYC budget

Securities firms raise money for AI companies and profit as investors push those stocks higher. Second-quarter 2026 earnings hit $25 billion, 66% above the same quarter a year earlier. First-half earnings of $46 billion are up 50% from the first half of 2025, two-thirds of the way to last year’s record and already more than the city’s budget assumes those firms will earn all year. Those profits bring in billions of dollars that cover large gaps in both the city and state budgets.

“New York City has ridden the AI boom more than anyone in America except San Francisco,” Levine said. He added that local firms are financing the data center building boom and running the initial public offerings. In San Francisco, tech workers are the most prominent figures, but he said the connection in New York is a step removed. “New Yorkers don’t realize how our fate has been tied to the AI boom,” he said.

Wall Street expert Mike Mayo has called AI the top earnings driver for big banks this year. He compared the capital needs of tech firms, utilities and related industries to a 100-foot wave lifting the financial sector.

What the dot-com crash cost New York

The city has lived through a version of this before. Near the end of the 1990s, internet companies arrived in New York by the hundreds, with many clustering in Midtown South, while Wall Street brought firms such as Amazon.com and Pets.com to the stock market. When investors concluded the sector was a bubble, they fled. Between March 2000 and October 2002 the Nasdaq composite index lost 75% of its value, funding dried up, and most of the city’s internet companies shut down, Pets.com included.

Wall Street profits then dropped by two-thirds, and the industry cut some 35,000 jobs, one in every four. The response to the 9/11 attacks drained the city further. The budget squeeze grew severe enough that Mayor Michael Bloomberg raised property taxes, going back on a pledge from his campaign.

A bubble forms when asset prices, such as stocks or homes, climb so fast that they stop reflecting the profits behind them. If AI valuations fit that description and Wall Street stumbles, New York City would feel it almost at once.