(co-authored with Joanna Doven)

Note: This newsletter was initially published by Governing Magazine on September 26, 2024

The 2020s will be remembered as the era when artificial intelligence sparked not only an economic transformation, but a new industrial revolution. As Goldman Sachs put it last year, AI has shifted from an “excitement” phase to a “deployment” reality, permeating critical sectors of the economy including defense, health care and energy with rapid speed.

But while this shift reshapes industries, it will also reshuffle the competitive landscape of cities, metros and states. Even established tech powerhouses like California, renowned for its deep pool of talent, venture capital and innovation, face an uncertain future as they contend with so-called compute security issues, such as obtaining control of energy-hungry infrastructure including data centers or AI factories, which are the backbone of the emerging AI economy.

Recognizing such challenges, New York Gov. Kathy Hochul’s Empire AI initiative will invest $400 million in an effort to move compute ownership from the hands of large tech giants who maintain an “outsized control of the AI ecosystem” to the state’s research universities, local governments and emerging AI companies. While worthy, consider BlackRock’s launch of a $30 billion AI investment fund to build hundreds of global data centers. In collaboration with Microsoft and Nvidia, the historic effort represents one of Wall Street’s largest deals and demonstrates the massive scale and stakes involved in the race to lead the AI revolution.

At the dawn of this revolution, what areas are positioned to benefit the most? Pittsburgh has a unique set of ingredients. It is already a premier AI hub, built on its rich engineering heritage from its steel and manufacturing leadership and the strengths of its renowned “eds and meds” sectors. Anchored by Carnegie Mellon University, the University of Pittsburgh (Pitt), and UPMC, Pitt’s medical center, the city boasts an innovation corridor where world-class universities and healthcare systems are co-located, consistently ranking among the top in the U.S. and globally.

Carnegie Mellon has a long history in artificial intelligence, including the creation of the first AI computer program in 1956 and pioneering work in self-driving cars, robotics, facial recognition and natural language processing. In the U.S. News & World Report college rankings, CMU is the top university for artificial intelligence for both undergraduate and graduate studies. The university also boasts AI-related formalized centers and schools, including the Software Engineering Institute, the Robotics Institute and the Advanced Robotics for Manufacturing, which enable close collaboration with the Department of Defense, corporations, tech firms and investors.

Pitt, for its part, is recognized as one of the nation’s top medical research universities, ranking third in National Institutes of Health grant funding in 2022, behind only Johns Hopkins and the University of California, San Francisco. Its $250 million BioForge Initiative represents a major step in positioning Pittsburgh as a global leader in cell and gene therapy manufacturing, harnessing AI to advance the life sciences. Both Pitt and Carnegie Mellon also lead research on the responsible use of AI, with Pitt having produced the world’s first report on ethical AI adoption by cities.

What Else Sets Pittsburgh Apart

But what truly sets Pittsburgh apart is the combination of high-paying opportunities for AI software engineers, lower living costs compared to cities such as San Francisco, a unique ecosystem of innovation districts and corridors and the ability to meet the energy demands of this transformational moment.

AI’s future is volatile and fast-moving, demanding constant innovation across technologies, power infrastructure, financial products, regulatory policies and business processes. Most importantly, it requires deep collaboration between universities, companies, startups, investors, skills providers, governments, utilities and adjacent communities. This innovation imperative puts a premium on unconventional partnerships, positioning tech innovation districts and corridors, and the agglomeration benefits they offer, at the forefront of progress.

The imperative to innovate across multiple dimensions cannot be met in siloed labs or isolated research parks, or by lone researchers or independent companies. Rather, it can only be addressed at scale in districts and corridors where diverse entities come together around this AI imperative, leveraging the physical proximity of talented workers, regional economic development leaders, basic and applied R&D and next generation power infrastructure.

Pittsburgh’s unique position has already given rise to globally recognized innovation hubs like Robotics Row. The stretch along Penn Avenue, between Duolingo’s headquarters and Bakery Square, is equally well-suited to becoming an AI Innovation Corridor. Bakery Square offers both immediate and future Class A space, housing Google, the U.S. Army’s Artificial Intelligence Integration Center (AI2C), and a growing number of AI companies with applications spanning defense, energy, and healthcare.

Its proximity to Carnegie Mellon, with its tech transfer office on site, strengthens the synergy between academia and industry. World-renowned innovators like Andrew Moore – who built Google’s AI foundation and now leads the defense startup Lovelace AI – and Thomas Sandholm – whose AI program triumphed over the world’s best poker players – have already located their firms in this hothouse of innovation. This growing co-location of AI innovation leaders is only the beginning. It could be the path to attract more public and private investments, and ultimately grow tech jobs and their associated economic multipliers.

Several actions are necessary to realize the corridor’s full potential. The presence of AI2C could become a beachhead for a broader Federal AI Campus, housing innovation units within all the armed services and intelligence agencies, and trusted advisors such as RAND. The building of Sensitive Compartmented Information Facilities (“SCIFs”), which both accommodate various levels of classified information and provide firms with access to security clearances or federal contracts, could become part of the infrastructure.

Special efforts could be made to attract and grow other private companies to complete the ecosystem. There is enormous opportunity to replicate the Google experience of recent years by bringing large technology companies and prime defense contractors to Pittsburgh to be closer to the secret sauce of cutting-edge research, exceptional talent and applied innovation.

Perhaps most distinctive, public-private partnerships could drive an AI Power Initiative with the ability to build and connect modern data centers, or AI Factories/Pods, to the corridor’s economy generating AI entities.

The ingredients for this Initiative – energy, workforce, and strong public leaders – are uniquely present in Pennsylvania, with the Pittsburgh region propped atop one of the world’s largest natural gas reserves, an abundant water supply, and a strong labor workforce. Former vacant steel sites sit alongside fiber lines ready to be reimagined, as forward-thinking movement from local utilities, companies and public entities reinforce this innovation imperative.

Local utility Duquesne Light recently received a $40M Department of Energy grant to deploy Nvidia-based technology that moves power faster. Westinghouse is building small modular nuclear reactors in nearby Etna on the heels of the news that Three Mile Island will be back in business, powering AI.  And the state’s popular leader, Governor Josh Shapiro is one of two governors with a “critical investment” team shepherding historic federal funding into the state, namely in energy investments. His “all of the above” energy strategy secured $1.7 billion to, in part, leverage the natural gas transition to low-carbon blue hydrogen.

The positioning of Pittsburgh’s unique economic opportunity has already begun. An AI Horizons Summit is scheduled for October 14, featuring Gov. Shapiro and a plethora of industry leaders. The summit aims to highlight the city’s commitment to “human-first” AI and responsible technology, differentiating it from other cities competing for leadership in this space.

Nvidia’s CEO Jensen Huang has declared that we have entered the “Fifth Revolution,” driven by AI, marking a pivotal shift akin to the Industrial Revolution. This era is characterized by the integration of AI into every aspect of human life, from business processes and health care to defense and entertainment, transforming the way we work, live, and interact with the world. Huang believes that AI will become the central driver of technological advancement, pushing the boundaries of what’s possible in fields like autonomous systems, generative AI, and advanced machine learning.

For Pittsburgh, embracing this revolution means positioning itself at the forefront of AI innovation.  It already has the talents; now it needs swift government action, company attraction, infrastructure investment and strategic marketing. The city, built on industrial innovation during the industrial revolution with figures like Andrew Carnegie at its core, is now primed to capitalize on this new AI-driven era.

By leveraging its assets and historical strengths, Pittsburgh can become home to the next generation of AI unicorns, replenishing the region’s historic philanthropic resources and finally restoring Pittsburgh to its rightful role of a top global tech city.

Bruce Katz is the founding director of the Nowak Metro Finance Lab at Drexel University. Joanna Doven advises on economic growth and positioning strategies for developers and institutions as CEO of Premo Consultants. This article emanates from work commissioned by Walnut Capital and a related AI Working Group, comprised of civic, nonprofit, workforce, emerging and longstanding tech companies