State leaders across the country find themselves in a critical moment — one where decisions about how to regulate emerging technologies and shore up grids and infrastructure to power them could be the difference between an economic boom and being left behind. In the first half of this calendar year, just six leading U.S. tech companies announced a staggering $180 billion in total capital expenditures, much of which was allocated to AI-related infrastructure and equipment. Investments of this magnitude dwarf capital spending by traditional economic catalysts, such as major manufacturing industries, and set records for the states that welcomed them. 

Not unlike the rush to secure high-wage auto assembly and parts plants in the 1980s and 1990s, governors are playing an increasingly pivotal role in ensuring these transformative investments for their respective states. During those decades, the most celebrated governors deployed a policy toolkit that included strategic tax incentives and workforce development programs to encourage major projects from automakers, earning them the title of economic heroes. Today, during the race for AI capital, many of these strategies remain critical, and the governors wielding them are being championed.

Over the course of the Democratic Governors Association Conference in Phoenix, one message was made clear: with the 2026 midterms on the horizon and the absence of clear direction from the federal government, state leaders have a real opportunity to set the national tone. When it comes to AI investment, the decisions made in state houses and governors’ mansions could be the difference between broad-based economic growth and missed opportunities, which are even more concerning given the growing economic uncertainty. 

To capitalize on this moment, the Progressive Policy Institute unveiled at this week’s conference the “AI Innovation Toolbox for Governors,” a strategic policy roadmap to seize AI-driven growth. Building upon the successful model established by forward-looking governors across the country, the toolkit urges those looking to attract AI projects to adopt smart energy policies, provide strategic incentives, develop strategic partnerships for AI research, and support the deployment of AI education and training for their state’s workforce. 

States that have taken these steps have thrived in the AI economy, and their governors have garnered national recognition for securing growth at a time when opportunities to do so appear to be waning rapidly. This is especially true for those who have taken steps to strengthen their state grids and collaborate with utilities and purchasers on innovative agreements to ensure access to reliable and affordable power. To see it in action, look no further than the work of Governor Katie Hobbs and her administration right here in Arizona.

In just the past two years, Governor Hobbs has positioned Arizona as a highly competitive state in the AI landscape. Her administration established the state’s first AI steering committee, which brings together leaders from academia, industry, and civil society to guide the state’s AI adoption efforts and identify opportunities to enhance AI literacy and workforce preparedness. 

These efforts are being complemented by the welcoming of the semiconductor and data center industries through energy and infrastructure planning, ensuring the state has the power it needs, not just for data centers and manufacturers, but for broader electrification trends. By emphasizing predictability in grid planning, the state has signaled it understands the central role energy policy plays in accelerating the transition to a nationally recognized AI leader. 

Still, Arizona cannot afford to slow down. While the recent actions by Attorney General Kris Mayes to keep utilities from arbitrarily raising prices and creating unpredictability are promising, there is still more work to be done. As the competition for AI investment accelerates, Arizona is well-positioned to lead, but only if it can provide the incentives and regulatory stability that other states can offer. Yet, by following the successful pathways paved by other leaders, as outlined in the AI Innovation Toolbox, it can put itself on a strong footing to capture the next wave of opportunity.

Michael Mandel is vice president and chief economist at the Progressive Policy Institute in Washington, DC.