As Amazon moves in, lawmakers weigh innovation vs. oversight in AI policy

Speaking outside the historic Jackson Mansion in Berwick in early June, Gov. Josh Shapiro declared that Pennsylvania is going “All in on AI” with his announcement that Amazon Web Services will be investing $20 billion in artificial intelligence infrastructure in the Keystone State. 

The e-commerce giant’s commitment to funding the construction of two new data center campuses in the commonwealth, including one in Luzerne County – just six miles from the Jackson Mansion – holds special significance in the region. It will be located near the Susquehanna Steam Electric Station, an active nuclear power plant in Berwick, as the tech industry looks to energy sources like nuclear power and natural gas to run the data centers needed to train and deploy AI models. 

The Democratic governor is no stranger to AI; he launched a pilot program in partnership with OpenAI that provided state employees with access to ChatGPT Enterprise in January 2024. Shapiro said in June that Pennsylvania is well-positioned to lead in the new AI economy due to the state’s diverse energy sources, noting that Pennsylvania is the second-largest energy producer in the country and a net energy exporter. “That means we can produce enough power to support the energy-intensive supercomputers and server farms at Amazon's data centers,” he said. 

Microsoft similarly looked to Pennsylvania’s energy sources when considering how to power its own data centers. In 2024 the company announced a 20-year power purchase agreement with Constellation, the owner of a shuttered nuclear reactor at Three Mile Island in Middletown which will be resurrected as part of the deal.

But energy is just one asset that the commonwealth has in its portfolio to attract AI businesses and infrastructure, the governor said. He also pointed to universities across the state – like Carnegie Mellon University, Pennsylvania State University and the University of Pennsylvania, to name a few – as a major selling point to AI companies looking to plant roots in Pennsylvania. 

“Pennsylvania has a strong track record of innovation. We are home to some of the leading universities on AI and cloud computing development,” Shapiro said. “So as Amazon now looks around for partners to develop the next generation of AI, they don’t have to look any further than right here in our commonwealth.”

The news of Amazon’s $20 billion AI investment comes at a time when artificial intelligence is already reshaping how people across the world work, live and play. 

AI tools are now built into email platforms and digital workspaces, providing summaries and writing assistance at the click of a button. Generative AI chatbots like OpenAI’s ChatGPT, Anthropic’s Claude, Google’s Gemini and xAI’s Grok can generate text, images and audio – and are being used to write papers, develop code and analyze information. AI is also being used across various industries, from medical diagnoses to financial services. 

While it may seem like the hottest new technology, AI isn’t exactly new. The term typically refers to machine-based systems that can make predictions, recommendations or decisions when given human-defined objectives. Mehrdad Mahdavi, a professor of computer science and engineering at Penn State University who leads the university’s AI Hub, told City & State that AI can be traced back at least 75 years to when neurophysiologist ​​Warren McCulloch and cognitive psychologist Walter Pitts published a paper outlining the first mathematical model of a neural network – a machine-learning program or model that makes decisions in a manner similar to the human brain.

Thanks to improvements in technology and computing power, AI is seemingly everywhere now. And while some are likening the AI boom and its potential impacts to the Industrial Revolution, Mahdavi said AI’s footprint could be even larger.

“Unlike other technologies in human history, like the steam engine or the Industrial Revolution, I would call AI a kind of omni-revolution,” he said. “I think it's gonna transform how we work, how we communicate, how we do science, how we learn, how we teach – that's why I call it the omni-revolution. It's going to affect many, many areas at the same time.”

The Keystone of the AI Economy

Across the political spectrum, state officials agree that Pennsylvania is uniquely positioned to become a major player in the AI economy – if the state can capitalize on its strengths and attract more AI investment within its borders. 

How best to do that varies depending on who you ask. Shapiro touted his administration’s efforts to speed up business permitting as a contributing factor to Amazon’s decision to invest $20 billion, and said his administration remains “actively engaged with Amazon on additional sites in our commonwealth.”

Republican state Rep. Stephenie Scialabba, who chairs an AI Opportunity Task Force made up of GOP members, told City & State that Pennsylvania “is in a very unique position” to capitalize on the AI boom. 

“With respect to our domestic energy supply and resources, our infrastructure, our workforce – we have everything that we need to really become the keystone of AI,” Scialabba said. 

Scialabba, an attorney whose legal practice focused on data privacy and cybersecurity issues, said the state could benefit from establishing a dedicated “AI liaison” in the governor’s administration who understands the AI space and works with the private sector to attract AI businesses and development to the commonwealth. 

“We hear so much about the speed of business. Well, think about the speed of compute. You need to be able to do things very, very quickly and be nimble. So we need to have a dedicated staffer in the administration,” she said. “We've got the secretary of ag, right? Well, we should have a secretary of AI.”

Scialabba also said the state should offer incentive packages to attract AI and AI-adjacent businesses to the commonwealth. She said she’s sponsoring legislation to create dedicated AI “opportunity zones” to attract businesses to particular parts of the state. 

Other states have also looked to put together incentive packages to win over AI companies, according to John Boyd Jr., whose Boca Raton-based firm, The Boyd Company, advises corporations on site selection. Boyd has helped site data centers for companies including Dell, Yahoo, Intuit and Microsoft, among others. 

He told City & State that incentive packages can include sales tax abatements for server equipment, property tax abatements and breaks for using renewable energy sources like wind and solar. 

Boyd said that when considering sites for data centers, the most important components are access to power, the availability of shovel-ready real estate, access to water and the price of land. He said Pennsylvania “stacks up very well” in comparison to other states looking to cash in on the AI economy. 

“In the business of corporate site selection, Gov. Shapiro deserves a tremendous amount of credit for being a moderate on energy,” Boyd said. 

Joanna Doven, the executive director of the Pittsburgh-based AI Strike Team, which focuses on growing the AI economy in the Pittsburgh region and across Pennsylvania, said leaders in Southwestern Pennsylvania are already identifying a range of sites for data center infrastructure. 

According to Doven, the Southwestern Pennsylvania Commission, an organization that serves 10 counties and seeks to direct the use of state and federal funds for transportation and economic development projects, launched a regional initiative called Operation Stargate Pittsburgh in March. This initiative aimed to identify locations for AI infrastructure. The result: More than a dozen sites were flagged as “highly marketable for large-scale data center and AI infrastructure development.” Doven said the approach mirrors a similar effort in Ohio.

Doven added that the state shouldn’t let ongoing discussions about how to regulate AI get in the way of investments. “There's billions of dollars in an infrastructure investment going somewhere,” she said. “And if we say we're not going to take part because we don't think this technology is perfect, then our children and grandchildren are going to be fleeing the state for jobs in other states.”

Not everyone is on board with the development of AI and data center infrastructure. Critics, including environmental advocates, fear that the expansion of data centers will lead to increased reliance on natural gas and hinder the state’s transition to renewable energy sources.

In a statement following the Amazon announcement, two climate groups, the Better Path Coalition and No False Climate Solutions PA, expressed reservations about welcoming more data centers to the state, citing their energy consumption. 

“Jumping on that bandwagon guarantees that emissions from the natural gas likely to power most of the plants proposed for Pennsylvania will more than cancel any ground gained in the renewables sector,” their statement reads. 

Opponents also fear that the widespread adoption of AI could result in job displacement – a concern that AI leaders have also acknowledged. Dario Amodei, the CEO of Anthropic, the tech company behind the Claude AI chatbot, recently warned that AI could eliminate 50% of entry-level white-collar jobs within the next five years, according to Business Insider.

Mahdavi downplayed science fiction-esque fears that AI will replace humans, but said he concurred that job displacement is likely. Doven also agreed with that assessment, noting that it will be important for workers – and future workers – to become familiar with AI tools. 

“When we talk about the future of work, those who refuse to learn and adapt to the new AI economy and learn AI – they will be the ones who won't have a job,” she said. “We need to prepare our youths – from pre-K on – for AI.”

Giving AI Guardrails

Job displacement, hallucinations and data privacy concerns around AI have alarmed skeptics and supporters alike, and have sparked conversations about how to regulate the emerging and evolving technology.

In the Pennsylvania General Assembly, lawmakers from both parties have introduced bills to establish guardrails for AI. Ideas range from laws that prohibit the use of AI to create deepfakes, or artificially created content that has been deceptively altered to change a person’s identity, to efforts to disclose all content generated by AI. 

State Sen. Tracy Pennycuick, a Republican who chairs the Senate Communications & Technology Committee, told City & State that lawmakers should craft policies that go after people who use AI for nefarious purposes.

Pennycuick was the prime sponsor of legislation signed into law last year that prohibits AI from being used to create child sex abuse material, also referred to as child pornography, while also making it a crime to share AI-generated sexual images without a person’s consent. The Senate also recently passed legislation from Pennycuick that would create an offense for digital forgery, making it a crime to create a “forged digital likeness” with the intent to defraud or injure another.

But outside of cracking down on the use of AI in crime and digital scams, Pennycuick said she doesn’t want to see the state take a heavy-handed approach to AI regulation. 

“I'll be honest with you: I have no intention of regulating AI,” she said. “My intention is to keep the bad actors from exploiting AI to defraud or hurt the citizens of Pennsylvania.”

Scialabba concurred: “We have a default of jumping the gun. We always want to regulate. We want to do more. Sometimes less is more,” she said. “We want to make sure we get this right, because the last thing that we need is to get it completely and totally wrong – and all we do is suffocate innovation.”

While Republicans in Harrisburg are hoping to place soft guardrails on AI, lawmakers at the federal level are considering a nationwide preemption on state AI regulations, meaning states would be banned from “limiting, restricting, or otherwise regulating artificial intelligence models, artificial intelligence systems, or automated decision systems entered into interstate commerce.” That language, which is included in the “One Big Beautiful Bill” backed by President Donald Trump, initially concerned Pennycuick and the ranking Democrat on her committee, state Sen. Nick Miller. 

The two wrote in a May letter to Pennsylvania’s congressional delegation that for the U.S. to become a global leader in AI, “states must retain the flexibility to act swiftly as new opportunities and risks emerge.”

“State legislatures are often first to confront these challenges, including protecting consumers, safeguarding critical infrastructure, and promoting innovation and development of small and medium-sized businesses,” the letter reads. “A decade-long preemption would impede this essential work.”

Pennycuick said she has since received assurances that the 10-year preemption would not apply to AI-related laws that address crime, meaning her child pornography law and her deepfake legislation likely wouldn’t be impacted. “What we are hearing now is they don't want (AI) to be regulated, but anything that is involved with the criminal code would remain on the books.”

“We're still working very hard with Sen. Fetterman and Sen. McCormick to get that stripped out,” she said. “Hopefully, we'll be successful.”

The preemption language in Trump’s megabill will likely determine how – and whether – Pennsylvania will move forward with its own AI regulations. With the future of state-level regulations still a bit murky, City & State asked ChatGPT to assess Pennsylvania’s AI future. 

“In a swing state where people argue over gas stations and sports mascots, there’s finally one thing folks might agree on: beating New Jersey in the race for AI supremacy,” the chatbot replied.