Frontier AI companies are being squeezed from two directions at once: tighter safety regulation and rising infrastructure costs.
Illinois moves first on mandatory AI audits
Illinois has enacted the Artificial Intelligence Safety Measures Act (S.B. 315), becoming the first U.S. state to require annual independent third-party safety audits for frontier AI developers with more than $500 million in annual revenue.
Covered AI labs must also:
• Publish their safety frameworks
• File transparency reports before deploying covered models
• Report critical safety incidents to state authorities within 72 hours
The significance goes beyond Illinois. While Washington continues debating a federal framework for frontier AI, states are beginning to impose binding requirements of their own.
Meanwhile, AI hardware could get more expensive.
President Trump has signed a proclamation under Section 232 of the Trade Expansion Act imposing new tariffs and a Minimum Import Price (MIP) regime on imported polysilicon and certain downstream derivatives.
The move follows a Commerce Department national-security investigation and could raise baseline input costs across semiconductor manufacturing and energy infrastructure.
For AI companies, these two developments point to a broader shift:
The cost of building frontier AI is rising on both sides of the equation.
Developers may face higher compliance costs for the models themselves, while tariffs and trade restrictions increase costs further down the physical stack—from semiconductor supply chains to the power infrastructure needed to run increasingly large AI systems.
The AI race is no longer just about who can build the best model.
Increasingly, it will also depend on who can absorb the cost of regulation, compute, energy, and increasingly protected supply chains.
Illinois is showing how states can move ahead of federal policy on AI safety. At the same time, U.S. industrial policy is reshaping the economics of the hardware underneath AI.
Together, they point toward a frontier AI industry that may become more regulated, more capital-intensive, and harder for smaller players to enter.
