Billionaire investor Mark Cuban decided to put New York City Mayor Zohran Mamdani's proposal for city-owned grocery stores to the test—not with a spreadsheet, but with an AI chatbot. On Monday, Cuban asked Grok to crunch the numbers on whether such stores could actually break even, factoring in typical grocery margins and operating costs.

Grocery Margins Leave Little Room for Discounts

In a post on X, Cuban asked Grok which grocery products have gross margins of 70% or more—enough to support a 30% discount—and then followed up by asking how much sales a store operating on just 15% margins would need to break even.

The chatbot's response wasn't encouraging. It said almost no grocery categories consistently hit gross margins of 70% or more, with even the highest-margin segments falling short. It did note that a focused assortment of higher-margin products could fit in a 2,000- to 5,000-square-foot store, but the economics got worse from there.

Excluding labor and employee benefits, Grok estimated annual operating costs at roughly $25 to $55 per square foot, covering rent, utilities, maintenance, and insurance—and noted that costs could be even higher in New York City.

Can a City-Owned Grocery Store Make Money?

The analysis didn't stop at store-level math. Grok also looked at the broader track record of government-backed grocery stores in the U.S., and it's not pretty. The chatbot cited examples like Baldwin, Florida; Erie, Kansas; Kansas City's subsidized Sun Fresh; and several Illinois-backed grocery stores—many of which either closed or were handed over to private operators after sustained losses.

In short, Grok concluded that purely government-run grocery stores have historically struggled to stay financially viable without ongoing subsidies or private-sector management.

Proposal Draws Fresh Criticism From Tech Leaders

Cuban had shared a post by All-In Podcast host Jason Calacanis, who criticized Mamdani's proposal, arguing that grocery stores already operate on razor-thin 1% to 2% profit margins and questioning why governments should subsidize the business.

Tesla Inc. Tesla (TSLA) and Space Exploration Technologies Corp. SpaceX (SPCX) CEO Elon Musk also weighed in, saying AI and robots would eventually provide free goods and services, while calling Mamdani “a thief and a liar.”

On the other side, Rep. Ro Khanna (D-Calif.) defended Mamdani's proposal, arguing that critics were blaming city-owned grocery stores instead of higher food prices driven by the Iran conflict and President Donald Trump's tax policies.

Mamdani has proposed city-owned grocery stores across New York City's five boroughs, with the city planning to issue requests for proposals to identify operators.

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