It is not the first time a novel asset has crashed into real estate. In the late 1990s, shares of hot tech startups were used to buy houses in Silicon Valley. Then the dot-com bubble burst.
Stock values evaporated. Sellers who thought they were set for life were left holding worthless paper.
Now it is happening again. Pre-IPO stock in artificial intelligence companies—specifically OpenAI—is being used as currency in Bay Area home deals. A viral text message showed one tech founder whose offer on a Noe Valley home, hundreds of thousands over asking, was rejected.
The seller chose a buyer who paid in OpenAI shares instead. Kevin O’Connor, an associate broker with Sotheby’s, says the practice is spreading.
“I think the motivation is to get the jump on things,” O’Connor said. For sellers, the gamble is clear: they bet the AI company’s value will keep climbing. For buyers, it is a way to compete without liquid cash.
Ahmed Banafa, a tech expert at San Jose State University, laid out the logic plainly. “They trust that this company is a good company and that this company is a company that can deliver based on everything they’ve heard about it,” Banafa said. He added that the arrangement helps the companies themselves.
“That’s going to increase the value for the companies, because now the shares of the company are used as a currency.” But Banafa also warned of risks. Stock values can fall once companies go public.
Sellers could face an outsized tax bill. That is the same warning that went unheeded in the late 1990s. Then, the crash was brutal.
Homes were lost. Trust in tech currency collapsed.
This time, the currency is pre-IPO shares of OpenAI. The difference is that OpenAI is not yet public. There is no market price.
The value is entirely speculative. Sellers are betting on a future that may not arrive. The viral text message that exposed this trend did not come from a real estate agent or a banker.
It came from a founder whose offer was rejected. That founder lost out to someone who traded paper for a house.
The trend is not confined to San Francisco. It is resonating across Asia, where investors watch the AI sector closely. Families and investors there see the same dynamic: a new asset class trying to buy old-world property.
The question is whether this time is different. It is worth remembering that the dot-com era also had smart people making confident bets.
They also believed the companies would deliver. Some did. Most did not.
The sellers who took stock instead of cash often regretted it. The tax bills came due. The shares were worthless.
Banafa’s warning about tax exposure is key. If the stock value drops after the sale, the seller still owes taxes based on the higher valuation at the time of the deal.
That is a double hit: a loss on the asset and a large tax bill. It is the kind of risk that can wipe out a family’s savings. For now, the trend is growing.
O’Connor sees it more and more. The appeal is real.
Sellers want a piece of the AI boom. Buyers want an edge in a brutal market. But the history of using stock as currency is not kind.
The last time it happened, the lesson was painful. It is a lesson that may need to be learned again.
