AI Boom Drives Power Demand, U.S. Utilities ETFs Up 8% Year-to-Date

The rapid development of artificial intelligence (AI) is fundamentally reshaping investment logic in the utilities sector by 2026. As AI data centers drive explosive growth in electricity demand, the traditionally defensive utilities industry has emerged as a key growth investment theme, pushing related ETFs up approximately 8% year-to-date.

Studies indicate that data center equipment is expected to grow at an annual rate of around 25% over the next four to five years. Meanwhile, bottlenecks in transmission and power infrastructure have paradoxically become a key bullish factor for the utilities sector.

On the macro front, the Federal Reserve's 75-basis-point rate cut at the end of last year has stabilized interest rates at 3.75%, effectively lowering financing costs for capital-intensive utility companies.

Although the 10-year U.S. Treasury yield remains high at 4.54%, limiting further expansion of valuation multiples, the re-rating driven by AI-related demand has significantly altered the market landscape.

Major U.S. utilities ETFs currently include:

XLU (Utilities Select Sector SPDR Fund): The most widely held ETF with an expense ratio of just 0.08%. Its holdings are concentrated in industry giants such as NextEra Energy, Constellation, and Vistra. Notably, Constellation and Vistra, which own nuclear and natural gas power facilities and have signed power supply agreements with major tech companies, now trade at a price-to-earnings (P/E) ratio of 23x—well above their historical average of 17x.

VPU (Vanguard Utilities ETF): With an expense ratio of 0.09%, this fund includes a broader range of mid-sized utilities and water companies, offering more diversified exposure than XLU. It is ideal for investors seeking comprehensive sector coverage without overreliance on a few dominant power players.

RSPU (Equal-Weight ETF) and UTES (Actively Managed ETF): RSPU uses an equal-weighting methodology, mitigating the risk of overexposure to any single stock—such as NextEra Energy, which accounts for about 14% in other funds. UTES, in contrast, is actively managed by a professional team that dynamically allocates assets between regulated utilities and critical grid infrastructure operations.