Trump’s H-1B visa changes could ‘kneecap startups,’ drive talent elsewhere, experts say
President Donald Trump takes a question from a reporter before signing executive orders in the Oval Office at the White House on September 19, 2025 in Washington, DC.
Andrew Harnik | Getty Images
It’s been a chaotic few days for the tech sector, and industry executives and experts are still assessing how U.S. President Donald Trump’s latest immigration crackdown could shape the future of their workforces.
The Trump administration sparked widespread panic Friday after announcing employers will pay a new $100,000 fee for H-1B visas, which are temporary work visas granted to highly skilled foreign professionals. These visas have underpinned the U.S. tech workforce for decades.
Some tech executives, including Netflix co-founder Reed Hastings and OpenAI CEO Sam Altman, have lauded the changes to the H-1B program, but experts told CNBC that the Trump administration’s changes could prevent some tech companies — namely startups — from securing top foreign talent. These experts said the changes also run the risk of driving top talent toward other countries.
“The short of it is, it would be a disaster for America, for American companies, American competitiveness, American innovation,” said Exequiel Hernandez, an associate professor at the Wharton School of the University of Pennsylvania.
Tech’s reliance on the H-1B program
The current annual cap for H-1B visas is at 65,000, along with 20,000 additional visas for foreign professionals with advanced degrees.
In fiscal 2025, Amazon, Microsoft, Meta, Apple and Google are among the top 10 companies that employ the most H-1B holders. Prominent tech executives like Microsoft CEO Satya Nadella, Google CEO Sundar Pichai and Tesla CEO Elon Musk were H-1B recipients earlier in their careers.
As tech companies scrambled to respond before Trump’s proclamation went into effect at 12:01 a.m. ET on Sunday, the White House quelled some concerns on Saturday by clarifying that the fee is not annual and would only apply to new visas, not renewals for current visa holders.
More changes could be on the horizon.
The Trump administration teased a proposed rule on Tuesday that said H-1B recipients should be selected through a weighted process instead of a random one. The weighted process would take place when the number of requests for visas exceeds the limit of available spots, and it would be based on wage levels, the proposal said.
The proposed rule will officially publish in the Federal Register on Wednesday, and it’s still subject to change after the administration reviews initial public feedback.
Hastings called the Trump administration’s $100,000 fee a “great solution,” in a post on X on Sunday.
“It will mean H1-B is used just for very high value jobs, which will mean no lottery needed, and more certainty for those jobs,” he wrote.
OpenAI’s Altman expressed support for the updates during an interview with CNBC’s Jon Fortt on Monday.
“We need to get the smartest people in the country, and streamlining that process and also sort of outlining financial incentives seems good to me,” Altman said.
‘It kneecaps startups’
Historically, H-1B visas have cost employers somewhere between $2,000 to $5,000 per application, depending on the size of the company, according to the Immigration Law Group.
The new $100,000 fee is a big jump for small, cash-strapped startups.
“You’re not going to find many startups who are going to be willing to pay $100,000 per H-1B, in addition to salary for that H-1B,” said Adam Kovacevich, CEO of Chamber of Progress, a left-leaning tech industry trade association.
Even big tech companies could feel some pain and have to reassess who they use H-1Bs for. But their deep pockets come with advantages.
“A big firm like Microsoft or Google, even though it’s not ideal for them, they have workarounds,” said Wharton’s Hernandez. “They can offshore jobs, or they’re the ones who can make acquisitions.”
Garry Tan, the CEO of the popular startup accelerator Y Combinator, criticized the Trump administration’s new fee, writing in a LinkedIn post that “it kneecaps startups” and is a “massive gift” to overseas tech hubs.
“In the middle of an AI arms race, we’re telling builders to build elsewhere,” Tan wrote. “We need American Little Tech to win—not $100K toll booths.”
A picture shows logos of the Big Tech companies named GAFAM, for Google, Apple, Facebook, Amazon and Microsoft, on June 2, 2023.
Sebastien Bozon | AFP | Getty Images
China and other competitors loom large
U.S. tech companies big and small are fiercely competing with one another – and the rest of the world – as they race to develop the most advanced AI models and applications. Organizations like Meta have shelled out billions of dollars to recruit top AI talent in an effort to try and gain an edge.
The Trump administration’s changes to the H-1B program could complicate similar recruiting efforts.
“What this does is that it gives our competitors, other countries, places like Asia, Canada, Europe, they can then attract these employees to create new innovations,” said Steven Hubbard, a data scientist at the American Immigration Council, which is a nonprofit for immigration advocacy and research.
One big competitor in the war for talent is China. The world’s second-largest economy has long fought against the U.S. for tech dominance, and more recently the AI race.
Earlier this year, Chinese AI firm DeepSeek rattled global markets after claiming to create a large language chatbot that outperformed competitors at a fraction of the cost. The news raised questions over the significant sums that American tech companies are shelling out on AI.
Some experts worry that visa changes could deal a victory into China’s hands, sending top talent overseas. The move may also deter foreign students from attending university in the U.S. as uncertainty hangs over their post-graduation job prospects.
“Those students are going to look at this environment and stay home,” said Greg Morrisett, vice provost at Cornell Tech. “It’s giving a leg up to both China and India in terms of feeding their startup ecosystems.”
For Bradley Tusk, the CEO of Tusk Venture Partners, the changes to the H-1B program are simply “terrible.” American companies have to have access to top talent in order to compete at the highest levels, he said.
“America’s competitive advantage has always been the ability to attract the best talent from around the world,” Tusk said. “To limit our ability to recruit and compete is illogical.”
WATCH: JPMorgan CEO Jamie Dimon speaks out on H-1B visa changes
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Cameron Pappas, owner of Norton’s Florist
Norton’s
For Cameron Pappas, owner of Norton’s Florist in Birmingham, Alabama, the artificial intelligence boom is a world away.
While companies like Nvidia, Alphabet and Broadcom are lifting the stock market to fresh highs and bolstering GDP, Pappas is experiencing what’s happening in the real economy, one that’s far removed from Wall Street and Silicon Valley.
Small businesses like Norton’s, and companies of all sizes in retail, construction and hospitality, are struggling from higher costs brought by the Trump administration’s sweeping tariffs, and as downbeat consumers reduce their spending.
“We’ve just got an eagle eye on all of our costs,” Pappas, 36, told CNBC in an interview.
Norton’s generated $4 million in revenue last year, selling flowers, plants and gifts to locals. To avoid raising prices, which could cause customers to flee, Pappas has been forced to get creative, reworking some of his designs.
“If a bouquet has 25 stems in it, if you reduce that by three to four stems, then you’re able to keep the price the same,” Pappas said. “It’s really forced us to focus on that and to make sure that we’re pricing things the best that we possibly can.”
Pappas’ story and many like it are being masked in the macro data by the power of AI. In the first half of the year, AI-related capital expenditures contributed to 1.1% of GDP growth, according to a September report from JPMorgan Chase. That spending outpaced the U.S. consumer “as an engine of expansion,” the report said.
Total U.S. GDP increased at an annual rate of 3.8% during the second quarter of 2025 after falling 0.5% in the first quarter, the Commerce Department said.
U.S. manufacturing spending has contracted for seven straight months, according to the Institute for Supply Management. And construction spending has been flat to down, due to high interest rates and rising costs. Cushman & Wakefield said in a report this month that total project costs for construction in the fourth quarter will be up 4.6% from a year earlier because of tariffs on building materials.
The stock market shows a similar disconnect between AI and everybody else.
Nvidia CEO Jensen Huang delivers the keynote for the Nvidia GPU Technology Conference (GTC) at the SAP Center in San Jose, California, U.S. March 18, 2025.
Brittany Hosea-Small | Reuters
Eight tech companies are valued at $1 trillion or more and, to varying degrees, are all tied to AI. Those companies — Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, Tesla and Broadcom — make up about 37% of the S&P 500. Nvidia, with a $4.5 trillion market cap, accounts for over 7% of the benchmark’s value by itself.
Investors are giddy about the massive investments they’re seeing in AI infrastructure. Broadcom shares are up more than 50% this year after more than doubling in each of the prior two years, while Nvidia and Alphabet have jumped almost 40% in 2025.
That explains why the S&P 500 and Nasdaq are up 15% and 20%, respectively, reaching record highs on Friday, even as the government shutdown continues to cause economic angst.
Meanwhile, the S&P 500 subgroups that include consumer discretionary and consumer staples companies have increased by less than 5% year to date.
The latest troubling sign in the consumer market came on Thursday, when Target said it’s cutting 1,800 corporate jobs — the retailer’s first major round of layoffs in a decade. Target shares have plunged 30% this year.
“I think the message that the AI economy is sort of driving up the GDP numbers is a correct one,” Arun Sundararajan, a professor at New York University’s Stern School of Business, told CNBC in an interview. “There may be weakness in the rest of the economy, or not weakness, but there may be more modest growth.”
Investors will hear all about AI in the coming days, the busiest stretch of the quarter for tech earnings, and will be listening closely for additional guidance on capital expenditures. Meta, Microsoft and Alphabet report on Wednesday, followed by Apple and Amazon on Thursday.
Nvidia’s stock over the last year.
Last month, Nvidia announced a $100 billion investment in OpenAI, a startup valued at $500 billion. The capital will help OpenAI deploy at least 10 gigawatts of Nvidia systems, which is roughly equivalent to the annual power consumption of 8 million U.S. households.
Shares of Advanced Micro Devices have doubled this year and soared more than 20% earlier this month after the chipmaker announced a deal with OpenAI, while Oracle has been on a tear of late due to its ties to OpenAI and the broader infrastructure buildouts.
“Are we sort of inflating the economy now, thereby setting ourselves up for a crash in the future?” Sundararajan said. He added that he’s not seeing signs that demand for AI infrastructure will slow anytime soon.
‘Tariff price management’
When it comes to local businesses, most only know about the AI gold rush from the news headlines. One in four small business owners are stuck in “survival mode” as they contend with challenges like rising costs and tariffs, according to a September KeyBank Survey. It’s a segment of the economy that routinely accounts for about 40% of the nation’s GDP.
Pappas’ flower shop was founded in 1921, and purchased by his dad in 2002. The business has survived the Great Depression, World War II and the Covid pandemic. Pappas said his father, who died in 2022, reminded him that these periods were “just another season” for Norton’s, and that such challenges come with the territory.
But Trump’s tariffs have created a whole new set of constraints, as roughly 80% of all cut flowers in the U.S. are imported from countries like Colombia and Ecuador, according to the U.S. Department of Agriculture.
There’s no way for Norton’s to avoid higher import costs, but Pappas said he’s started buying some flowers directly from South American growers, which saves him money versus going through distributors that charge extra.
Pappas said it’s part of his “tariff price management” effort.
Trump’s tariffs will cost global businesses more than $1.2 trillion this year, and most of those costs are being passed onto consumers, according to S&P Global.
With the holiday season rapidly approaching, consumer sentiment is of particular importance. The picture is bleak.
The majority of U.S. consumers, 57%, that responded to a Deloitte survey published this month said they expect the economy to weaken in the year ahead, up from 30% a year ago. It’s the most negative outlook since the consulting firm began tracking sentiment in 1997.
Gen Z consumers, which the survey defined as ages 18 to 28, said they plan to spend an average of 34% less this holiday season compared to last year. Millennials, those between 29 and 44, said they expect to spend an average of 13% less this holiday season.
Additionally, seasonal hiring in the retail industry is poised to fall to its lowest level since the 2009 recession, according to a September report from job placement firm Challenger, Gray & Christmas.
The firm released another report earlier this month that showed new hiring in the U.S. has totaled just under 205,000 so far this year, off 58% from the same period last year.
The Starbucks logo is displayed in the window of a Starbucks Coffee shop on Sept. 25, 2025 in San Francisco, California.
Justin Sullivan | Getty Images
Starbucks announced a $1 billion restructuring plan in September that involves closing several stores in North America. Around 900 nonretail employees were laid off as part of the plan, and the company let go of another 1,100 corporate workers earlier this year.
Starbucks shares are down about 6% this year.
Shares of Wyndham Hotels & Resorts slumped on Thursday after the hotel chain issued disappointing third-quarter results. CEO Geoff Ballotti cited a “challenging macro backdrop” in the company’s earnings release. The stock is down roughly 25% year to date.
Even in parts of the tech industry that have benefited the most from the AI boom, companies have been conducting layoffs. Microsoft announced plans to cut around 9,000 jobs in July, which the company partly attributed to reducing layers of management. Salesforce is one of a number of tech companies that have announced layoffs, saying that AI can now handle the work.
But Hatim Rahman, an associate professor specializing in AI at Northwestern University’s Kellogg School of Management, said that most businesses using AI for efficiencies won’t find them right away. So companies can’t count on the technology to counter declining revenue and, Rahman said, “the road to the future is going to be bumpy.”
“AI is not a plug-and-play solution,” Rahman said. “For many organizations, it’s going to involve engagement with people, processes, culture, tools to be able to reap the benefits. And in the aggregate, it’s going to take time.”
WATCH: The AI boom is lifting the stock market, but it may be masking a weaker economy
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