Ryan Ruiz, executive vice president of business development at the Arizona Commerce Authority (ACA), envisions a future where AI is as fundamental to business as electricity.

“Artificial intelligence really is going to power every sector in the economy,” says Ruiz, whose team at the ACA — Arizona’s leading economic development organization — is spearheading the state’s AI-driven industrial growth.

AI’s vast potential is throttled by severe shortages in specialized semiconductor hardware, including GPUs, memory and storage as well as a critical deficit of technical talent. These capital and labor limitations have become the primary bottlenecks hindering global AI penetration.

As industry leaders, governments and educators work to address these blockages, Arizona is already delivering solutions. With deep roots in semiconductor manufacture and design, celebrated engineering universities and a history of managing rapid growth, the state is defining the path forward for AI-related industries.

Ahead, learn how Arizona’s strengths in innovation infrastructure are helping to reduce friction affecting AI growth.

1. Massive Investments And World-Class Research Facilities Are Catalyzing Semiconductor Advancements

For more than seven decades, with activity accelerated by the 2022 passage of the CHIPS Act, Arizona has raced for a global leadership position in semiconductor development and manufacture.

Ruiz says the ACA led publication of the National Semiconductor Economic Roadmap (NSER), which sets specific targets for domestic chip production as well as initiatives to meet short- and long-term goals. Concurrently, the ACA has made multiple eight-figure investments in research & development and workforce advancement, along with facilitating early-stage startups.

The ACA reports that dozens of companies representing every stage of semiconductor development, manufacturing and packaging have established or expanded operations in Arizona recently. The investment is led by Taiwan Semiconductor Manufacturing Company (TSMC), which has announced $165 billion to build six leading-edge fabrication plants – known as “fabs” – two advanced packaging facilities and a major research & development center.

The ACA is also strategically investing in the state’s workforce and infrastructure, including $35.5 million for the University of Arizona’s Nano Fabrication Center, which also includes a partnership with community colleges.

Meanwhile, a $47.5 million investment at Arizona State University (ASU) will enable a first-of-its-kind research, development and prototyping lab to support next-generation wafer manufacturing and chip packaging.

2. Startups Say Arizona’s Infrastructure Makes It Easier To Scale, And Succeed

Mariana Bertoni, Ph.D., is just one of Arizona’s recent semiconductor success stories and emerging leaders. As an engineering professor at ASU, Dr. Bertoni developed next-generation chip manufacturing processes that she’s now scaling at Crystal Sonic, the startup she co-founded and leads as chief technology officer.

“ASU gave me a great platform to actually just test … even as a very junior professor … [and] just follow some crazy ideas,” she says.

Today, those ambitious experiments are targeting the present reality of semiconductor manufacturing. As much as 95% of the raw material used in chipmaking is discarded as waste product, according to Crystal Sonic. Reducing waste with the next-generation wafer-cutting system co-designed by Dr. Bertoni could lead to substantially reduced manufacturing costs, which is just one example of how Arizona’s semiconductor minds tackle today’s AI challenges.

Moving from traditional chip-making materials to emerging options like silicon carbide and gallium nitride can also help reduce power consumption and waste heat as well as improve the performance of future chip generations, says Arno Merkle, Crystal Sonic’s CEO.

“We're applying our technology very much to facilitate a better utilization of that material, so that these new applications can really blossom and accelerate,” Merkle says. “And we are looking out a decade or two ahead [to] where the technology is evolving and using even more specialized materials to create chips, [like] diamond.”

Semiconductor companies need a steady supply of trained and engaged workers. The ACA and industry partners developed the Future48 Workforce Accelerator program to satisfy that demand. Designed in part for Arizona’s two-year colleges, the program simulates the workflow of a real chip fab clean room and is modeled on a successful initiative designed to spur growth in electric vehicle manufacture.

“We've had dozens of workforce development leaders from across the country come out and see these [training] facilities,” says Patrick Ptak, Executive Vice President of Executive Initiatives at the ACA. “And, most of the time, they come out [of the program] and have an interview waiting at one of the industry partners.”

3. Arizona’s Robust Energy Grid Can Power Next-Gen Innovation

Adequate and reliable power delivery — which supports existing needs as well as burgeoning AI data centers — is a country-wide concern. A recent report indicates that tech companies are agreeing to voluntarily reduce consumption at their data centers upon request from utility companies.

On some level, this is a matter of physics — advanced AI installations run thousands of GPUs concurrently on learning and processing tasks. Each GPU must be powered, and anything that is powered necessarily generates waste heat.

Ptak says the ACA believes that Arizona was built for this moment, citing recent federal data showing that in 2024, the state experienced 87.5 minutes of power interruptions, the second lowest in the nation and nearly one seventh the national average of more than ten hours.

“Semiconductor capacity at this scale requires equally massive energy infrastructure. That foundation is what enables everything else,” says Ruiz. “From the Governor’s Office to utilities and private industry, Arizona has been intentional about building the infrastructure required for the next generation of innovation.”

Ruiz says ensuring robust infrastructure supports the industry’s shared goal of creating a stable AI supply chain, spanning education, manufacture, operation and delivery.

“These suppliers are first movers in the U.S., and their growth will accelerate as the rest of the country works to match the pace we’re seeing in Arizona,” he says.

4. Strong Public-Private Partnerships Support New Growth

Merkle notes that “hard physical sciences technology is incredibly expensive upfront, and risky to develop,” and that there’s no avoiding the investments founders must make to get an idea off the ground. ACA grants were vital to getting Crystal Sonic’s innovative processes past the whiteboard stage, he says.

“[ACA] provided … the flexibility to really emphasize some of our work in one direction or the other, or do more commercial business development activities as well,” he says.

As the lead convening state of Arizona, Arizona was ideally positioned to act early and decisively on recommendations, piloting several large collaborations in the first months of NSER’s launch to ease barriers.

“There was a bottleneck for innovators and startups to use cutting-edge equipment to test their products,” Ptak says. To help solve that, he says the ACA allocated over $100 million that went toward providing professionals with real-world equipment and facilities for use at three of the state’s universities.

“The governor's office, all the way through private industry, utility partners and economic development groups have spent a lot of time to make sure that we're building the infrastructure needed for what we would call the next generation of innovation.”

At public-private facilities like ASU’s MacroTechnology Works, academics and industry professionals can collaborate on new solutions. “The semiconductor space typically has an extremely high barrier to entry when it comes to capital costs of machinery and equipment,” Ruiz says. “Shared facilities and clean rooms allow companies to innovate without carrying the full cost of that infrastructure.”

Why Arizona Is Forging The Next Frontier Of AI Success

There will inevitably be new industry challenges as AI continues to evolve. In Arizona, Ruiz is confident that ongoing collaboration and partnership between industry, research universities and civic leaders will meet the present and future of the technology.

“The success of NSER is rooted in deep industry engagement, and we’re continuing to build on that,” he says.

Crystal Sonic’s Merkle sums up Arizona’s future-forward status pointedly:

“We couldn't place our company, really, in a better physical location than where we are today.”