Buy these 4 Utility ETFs to Ride the AI Boom Before 2025 Ends

Core Viewpoint - The utility sector has transitioned from a defensive investment to a dynamic growth opportunity, driven by the increasing demand for electricity from AI-related data centers [2][3]. Sector Performance - The S&P 500 Utilities Index has delivered a year-to-date return of 16.2%, outperforming the broader S&P 500's return of 15.8% [3]. Demand Projections - Electricity demand in the U.S. is projected to rise significantly, with data centers expected to consume approximately 6.7-12% of total U.S. electricity by 2028, increasing usage by 325-580 terawatt-hours (TWh) from 176 TWh in 2023 [4]. Utility Company Actions - Utility companies are expanding generation capacity and upgrading infrastructure to meet the rising demand, with Duke Energy planning to bring over 13 gigawatts (GW) online by 2030 [6]. - NextEra Energy is partnering with Alphabet to restart the Duane Arnold Energy Center by 2029 to supply carbon-free power for AI operations [7]. Macro Conditions - Anticipated Federal Reserve rate cuts could lower borrowing costs for utilities, easing financial burdens and supporting valuations for companies involved in large-scale infrastructure projects [8]. Investment Strategy - Investing in utility-focused exchange-traded funds (ETFs) is recommended to spread exposure across various companies and mitigate risks associated with individual stocks [10]. Recommended Utility ETFs - Utilities Select Sector SPDR ETF (XLU): AUM of $22 billion, year-to-date gain of 19.4%, top holdings include NEE (12.77%) and CEG (8.18%) [11][12]. - iShares U.S. Utilities ETF (IDU): Net assets of $1.88 billion, year-to-date gain of 18.1%, top holdings include NEE (11.07%) and CEG (7.10%) [13]. - Fidelity MSCI Utilities Index ETF (FUTY): Net assets of $2.15 billion, year-to-date gain of 20%, top holdings include NEE (10.92%) and CEG (7.79%) [14]. - Vanguard Utilities ETF (VPU): Net assets of $8 billion, year-to-date gain of 19.9%, top holdings include NEE (10.99%) and CEG (7.75%) [15].