Trump’s visa squeeze sparks chaos in Silicon Valley

A strange sight gripped San Francisco International Airport late last week as dozens of Silicon Valley employees scrambled to leave planes they had already boarded.

The move was driven by Donald Trump’s bombshell announcement that America’s H-1B visa programme would come with a new $100,000 (£75,000) fee, triggering panic among Silicon Valley bosses.

After the surprise move, Google, Microsoft and Amazon quickly sent emails to staff members urging them not to leave the country or to return immediately if they were abroad. That left staff seeking to remain on US soil or boarding flights overseas to return to America.

The White House later clarified that the fee would be a one-time payment only for new applicants, and would not be imposed on America’s 1.2 million existing H-1B holders and their dependants.

But the change is still seismic.

“I’ve never seen anything this big or impactful in terms of intentional government regulation or policy [for the tech industry], not even close,” says Ethan Evans, a former Amazon executive who now works advising start-ups.

Analysts warn it will hammer America’s start-ups, drive tech-hiring offshore and threaten growth in the sector that has become the key engine of the American economy.

Shantanu Gangal, the chief executive of Prodigal, an artificial intelligence (AI) start-up, is already exploring the potential for hiring overseas.

He and his co-founder have contacted more than 120 applicants seeking jobs at Prodigal to tell them that their company is still hiring.

“We are reaching out to candidates who might consider going back from the US to India,” says Gangal.

For a few particularly specialised roles, the company may simply swallow the costs of the new visas, says Gangal. “But the $100,000 fee will eliminate some roles and make them completely unviable.”

H-1Bs are the most commonly used visas for companies bringing in highly skilled foreign workers and they are crucial for the tech industry.

In theory there is a cap of 85,000 on the total number of H-1Bs that can be issued each year, but non-profit educational and research organisations are exempt from this. Last year, the US issued 142,000 new H-1B visas and renewed an additional 257,000.

The vast majority are concentrated in Silicon Valley, with nearly two thirds of H-1B petitions in computer-related occupations.

This year, California has received more than double the number of approved H-1Bs than any other state.

More than 7,500 different companies in the state have used the scheme this year, according to US citizenship and immigration services (USCIS).

“The technical community is fabulously dependent on this set of resources,” says Evans.

America’s biggest tech companies might have the cash to cover the new bills, but the costs will be eye-watering.

Amazon is by far the biggest beneficiary of the visas.

In the current fiscal year, the company has had more than 10,000 H-1B visas approved. If each of these incurred a $100,000 fee, this would mean a new bill of just over $1bn.

“Having worked at Amazon, they’re not going to be, like, ‘oh yeah, no problem, let’s spend a billion dollars,’” says Evans.

Microsoft, Meta, Apple and Google each had between 4,000 and 5,000 approved, which would suggest an H-1B visa bill of around $500m a year in future.

Big tech companies are likely to start shifting hires offshore, says Evans. “Most of these companies already have overseas offices so they will ramp up their hiring in those overseas locations.”

Workers from India make up 70pc of H-1B visas. Simply making direct hires here is the obvious choice for Gangal. His co-founder, who was previously in the US on an H-1B visa, now runs a team from there already.

The UK is another option, he adds. Rachel Reeves, the Chancellor, wants to capitalise on the US policy change.

“While President Trump announced late last week that it will make it harder to bring talent to the US, we want to make it easier to bring talent to the UK,” she said on Tuesday.

The UK Government is reportedly planning to double the number of high-skilled foreign worker visas to around 18,000 per year.

But early-stage tech companies will not have the capacity to hire abroad. For them, the new fee may be existential.

“The biggest issue with this is that it has a much, much bigger negative impact on start-ups,” says Joshua March, a tech founder who hired several scientists on H-1Bs at his previous company.

“Honestly, I don’t know what we would have done if there was a $100,000 bill to hire someone. That is a massive, massive amount for an early-stage start-up that is venture-backed,” he says.

“Either they’re not going to hire someone who they actually need, and that’s going to have a negative impact on their business; or they’re going to have to do it anyway, and that’s going to drastically increase their costs.”

The Trump administration has also announced plans on overhaul the H-1B lottery process to prioritise higher-paid roles.

Credit: Unrestricted pool

This would be a further disproportionate blow to early-stage start-ups which typically pay below market salaries in exchange for shares in the company.

Darrell West, a senior fellow at the Centre for Technology Innovation at Brookings, says: “Small and medium-sized firms will be out of the visa business. They simply will not be able to compete.

“Anything that harms them is going to harm innovation. It will slow AI development. Trump’s very own policies are going to make it very difficult for the United States to compete with other countries.”

In smaller companies, any single position is vital. “Some of this is make or break. You’re looking to hire very specialised AI talent,” says Gangal.

Sophie Alcorn, the founder of Alcorn Law, a firm that helps start-ups with immigration that has offices in New York and Silicon Valley, warns the fees will be “extremely detrimental” to innovation.

“Everything has been non-stop insanely busy since Friday afternoon. I have only gotten a few hours of sleep a night. We have just been inundated with new cases. People are scrambling,” she says.

Start-ups will respond by searching harder for employees that do not need H-1Bs, says Evans.

In turn, this could trigger a poaching war between companies. Some may try to train up American workers, but many will not have the capacity to. Others will try to use AI to fill the gap. Ultimately, they will simply have less access to crucial talent.

Trump claims that the H–1B visa scheme has enabled the “large-scale replacement of American workers through systematic abuse of the program”, which he argues has undermined America’s national security.

Those in the tech sector warn that there are simply not enough Americans who are capable of doing the jobs.

“Often, the people that my clients are hiring are not replaceable. They’re often the only person in the world, or one of a handful of people in the world with a very specific engineering skill set,” says Alcorn.

Yet despite the toll, big tech bosses, who only a few weeks ago dined with Trump at the White House, have largely kept quiet. Evans says they are likely scared of retribution.

“Donald Trump could go after almost any of the big tech companies on different grounds. He can level catastrophic threats,” says Evans.

“I would assume the thinking in all of the boardrooms is, ‘Don’t confront. We can pay for the visas if we have to. We can lobby behind the scenes to get it changed. We can hopefully wait three years.’”

But waiting will be a brutal game. “I think the pain will accumulate, it will get harder the longer it goes on.”