Despite concerns that California’s costs and regulations are bad for business, the state has attracted an unprecedented pile of capital this year, and no other state is even close.

The Golden State’s deep pool of talent, rich investors and other tech infrastructure have made it ground zero for the artificial intelligence explosion. That has helped it attract more than $335 billion in venture capital funding this year, according to PitchBook’s private market funding data released Thursday.

Its next biggest competitor, New York, raised less than a tenth of California’s total. Texas raised 1/40th of the amount.

“California has far and away the most [deals], obviously, a huge amount of that sits in the [San Francisco] Bay Area,” said Kyle Stanford, director of U.S. venture capital research at PitchBook. “Los Angeles, San Diego has a really strong tech market that I think benefits a lot from capital moving easily between San Francisco and L.A.”

Although a campaign for a new tax on billionaires has convinced some ultra-rich residents to shift to other states and businesses often complain that high property and energy costs and an anti-business regulatory regime make it too tough to make money in the state, the inability of the top talent, companies and investors in AI to set up elsewhere shows California’s enduring attraction.

The state’s economy grew 5% last year to a record $4.25 trillion, making it larger than every country other than the U.S., China and Germany. It is home to nearly 400 billion-dollar startups — more than any other state, according to CB Insights.

Southern California has emerged as a go-to address for fast-growing space and defense tech companies.

“California’s workers, entrepreneurs, and innovators continue to prove that investing in California delivers real results,” Gov. Gavin Newsom said in a statement last week in response to strong productivity numbers for the state. “As one of the largest economies in the world, the Golden State demonstrates that a strong workforce, economic growth, innovation, and performance go hand in hand.”

In the three months that ended in June, 1,087 California companies raised $108.8 billion in venture capital. Just three companies — Anthropic, Jeff Bezos’ Project Prometheus and Anduril Industries — absorbed 75% of that total. Anthropic alone raised $65 billion, which valued it at nearly $1 trillion.

Among metropolitan regions, Los Angeles ranked behind only Silicon Valley and New York, which attracted $98 billion and $11.5 billion in venture investment, respectively.

“Capital is flowing back into American innovation with real force,” said Bobby Franklin, president of the National Venture Capital Assn., an industry group that put out the report with PitchBook. “Investment activity is picking up, fundraising is improving, and there are early signs the IPO market is beginning to reopen.”

Investors poured in nearly $8 billion across 207 deals in the Los Angeles, Long Beach, and Santa Ana metro areas, up 28% from a year earlier, according to PitchBook.

The top deals in the region were led by aerospace and defense companies Anduril Industries, which raised $5 billion, and Impulse Space, which attracted $500 million.

Companies in industrial parts, software, consulting and life sciences were the other sectors in the Southland that attracted venture investments. El Segundo-based industrial supplies company Advanced Manufacturing Company of America and Huntington Beach-based aerospace company Mach Industries each raised $300 million.

To be sure, the surge in the size and number of monster deals could be overshadowing other money-raising efforts from smaller companies and investment by smaller funds, industry experts said.

Nearly 90% of invested dollars went to AI firms, up from last year, when around 65% of new funds were allocated to AI.

“If you’re a tech company and you’re not an AI company, you have a very, very difficult opportunity ahead of you to raise capital,” Stanford said.

This concentration of capital in AI leaves smaller, middle-of-the-road venture funds without large AI holdings struggling to return capital to their investors.

Only the largest funds, such as Andreessen Horowitz and Sequoia Capital — which possess the war chest to back OpenAI, Anthropic, and SpaceX — stand to gain from their initial public offerings of stock.

“It’s going to concentrate the fundraising over the next few years as well into these already very large names,” Stanford said.

Beyond the two potential blockbuster listings — Anthropic and OpenAI, each valued around $1 trillion — the IPO pipeline is thin.

“We don’t really have a strong IPO market,” Stanford said. “Obviously, SpaceX’s IPO is great. OpenAI and Anthropic, if they go out this year, will be very large drivers of distribution. But a vast majority of investors do not have exposure to them, and so that money will not make it back to them.”

Whether California’s venture-investing boom can continue at this record-breaking pace now hinges on how the IPOs of Anthropic and OpenAI perform.

“If Anthropic and OpenAI have really strong financials, that’s a big push of support for the rest of the market,” Stanford said.