The artificial intelligence (AI) revolution has an insatiable appetite — not just for data, but also for electricity. Data centers consumed a staggering 448 trillion watt-hours of electricity globally last year, exceeding the power consumption of all but 10 countries, according to a report by researchers at the United Nations University Institute for Water, Environment and Health.
As tech hyperscalers deploy massive clusters of high-performance GPUs, data center power requirements rise, driving electricity consumption sharply higher. According to many experts, this trend could contribute to a global energy crisis if demand exceeds supply.
The result? Utilities, which are responsible for generating and meeting the humongous energy demand from AI, are witnessing unprecedented growth opportunities. The sector, once viewed strictly as a steady, defensive dividend play, is now at the epicenter of one of the most compelling growth stories in the equity market, being morphed into high-growth infrastructure engines.
With industry watchers expecting utilities to spend as much as $240 billion in 2026 to meet AI power demand, the sector is undergoing its most significant expansion in decades.
Against this backdrop, for investors who are increasingly hesitant to buy direct AI technology stocks — which face intense valuation pressures, uncertain monetization timelines, and heavy price volatility — utilities offer a compelling alternative. Utilities provide exposure to the AI growth story while offering the stability of regulated returns and consistent dividends — creating a buffer against the wild swings seen in tech stocks over recent months.
This intersection of explosive growth and stability makes utility-focused exchange-traded funds (ETFs) a potent strategy for investors looking to benefit from the AI boom without the associated rollercoaster.
Before jumping directly into the specifics of these ETFs, one might want to understand which specific utilities are at the forefront of this multi-decade energy demand growth and what they are doing to scale capacity aggressively. This should help investors assess how AI-driven power demand is reshaping the long-term financial prospects of utilities and making utility ETFs an increasingly attractive strategic asset.
How Are Utilities Scaling Up?
As the sheer scale of AI power requirements is creating localized energy crises, with forecasts calling for more than 100 gigawatts (GW) of new power demand from data centers through 2030, leading utilities are stepping up with aggressive expansion plans and direct tech collaborations, as one can find below:
NextEra Energy NEE, the largest U.S. utility by market cap, is expanding aggressively, particularly after it announced the takeover of Dominion Energy D for approximately $67 billion in May 2026. This was a strategic step by NEE to monopolize power generation in Virginia's "Data Center Alley," which handles a staggering percentage of global internet traffic.
In terms of collaborations with tech giants, the most notable ones include Alphabet’s GOOGL signing of a 25-year power purchase agreement with NextEra Energy last year to revive the shuttered 615-megawatt Duane Arnold Energy Center in Iowa by 2029. In March 2026, NextEra Energy joined forces with NVIDIA NVDA, Emerald AI, and other major energy providers and launched a strategic partnership to develop grid-flexible AI data centers.
Another prominent utility provider, Duke Energy DUK, signed electric service agreements with data center customers covering 7.8 gigawatts (GW) of demand, with a further 15.4 GW in the "late-stage pipeline”, as of June 2026. 5.2 GW of these projects are already under construction. Last year, Amazon Web Services (“AWS”) announced a $10 billion investment to build a massive, 800-acre data center campus in Richmond County, NC, to scale its cloud computing and generative AI infrastructure, and DUK is set to provide power for this infrastructure.
Another utility major worth mentioning is American Electric Power AEP, which recently expanded its five-year capital investment plan to $78 billion to accommodate massive power demands from AI and tech data centers. Roughly 90% of AEP's surging 63-GW pipeline of contracted capacity is tied directly to new data center customers across multiple states.
Utility ETFs to Buy
The massive capital expansions and tech-utility partnerships mentioned above underscore a permanent structural shift in how power is generated and monetized. For investors who would like to capitalize on this megatrend of AI power surge without taking on single-company execution risk, the most efficient and risk-managed way would be to add the following ETFs to their portfolios.
State Street Utilities Select Sector SPDR ETF XLU
This fund, with assets under management (AUM) worth $22.80 billion, offers exposure to 31 companies from the electric utilities; water utilities; multi-utilities, independent power and renewable electricity producers; and gas utility industries. Of these, NEE holds the first position in this fund, accounting for 13.04% of its total assets, while Southern Company SO ranks second with 7.60% weightage.
DUK holds the third spot in this fund with 7.02% weightage, while AEP ranks fifth with 4.94% weightage. D holds the sixth spot with 4.36% weightage.
XLU has rallied 2.9% over the past year and currently holds a Zacks ETF Rank #2 (Buy). The fund charges 8 basis points (bps) as fees and traded at a good volume of 17.85 million shares in the last trading session.
Vanguard Utilities Index Fund ETF Shares VPU
This fund, with net assets worth $8.5 billion, offers exposure to 68 electric, gas, and water utilities as well as companies that operate as independent producers and/or distributors of power. Of these, NEE holds the first position in this fund, accounting for 11.06% of its total assets, while SO ranks second with 6.84% weightage.
DUK holds the third spot in this fund with 6.24% weightage, while AEP holds the fifth position with 4.71% weightage. D holds the seventh spot with 3.81% weightage.
VPU has gained 2.9% over the past year and currently holds a Zacks ETF Rank #2. The fund charges 9 bps as fees and traded at a volume of 0.18 million shares in the last trading session.
iShares U.S. Utilities ETF IDU
This fund, with net assets worth $1.35 billion, offers exposure to 45 U.S. companies that supply electricity, gas and water. Of these, NEE holds the first position in this fund, accounting for 11.14% of its total assets, while SO ranks second with 6.49% weightage.
DUK holds the third spot in this fund with 5.98% weightage, while AEP holds the sixth position with 4.22% weightage. D ranks seventh with 3.72% weightage.
IDU has gained 2.6% over the past year and currently holds a Zacks ETF Rank #2. The fund charges 38 bps as fees and traded at a volume of 0.05 million shares in the last trading session.
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