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Buy these 4 Utility ETFs to Ride the AI Boom Before 2025 Ends
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For decades, the Utility sector has been viewed as the quintessential defensive play — a stable, slow-growth corner of the market offering reliable dividends while mostly missing out on explosive rallies. However, that old narrative is officially obsolete.
As the rise of artificial intelligence (AI) has created an insatiable demand for computing power, driving a massive boom in data-center construction and expansion, utilities have transformed from a defensive haven into one of the stock market's most dynamic growth stories.
Particularly this year, the utility sector has dramatically outperformed nearly all other sectors and the broader market, except for technology and communication services, with the S&P 500 Utilities Index delivering a year-to-date return of 16.2%, surpassing the broader S&P 500’s return of 15.8%.
As the year draws to a close, investors can capture this momentum by strategically investing in utility-focused exchange-traded funds (ETFs).
The Rationale Behind Utility Investment
Electricity demand in the United States is expected to rise sharply in the coming years, driven primarily by power-hungry data centers resulting from the booming AI industry. To this end, the U.S. Department of Energy, in its December 2024 report, projected data centers to consume approximately 6.7-12% of total U.S. electricity by 2028, with total data center electricity usage estimated to increase 325-580 terawatt-hour (TWh) by 2028 from 176 TWh in 2023.
The stunning growth projections make a compelling case for investing in utilities. This investment thesis is further validated by the actions of utility companies themselves. Their aggressive generation capacity expansion, accelerated transmission projects, and grid-upgrade plans, often in direct collaboration with major tech firms, reflect the enormous and rapid scale of AI-centric data center construction across America.
For instance, Duke Energy (DUK - Free Report) , a prominent U.S. utility company, revealed in July 2025 that it is actively building new generation to support AI-driven energy demand and has additional construction planned. The company expects to bring more than 13 gigawatts (GW) online through 2030, while simultaneously upgrading hundreds of thousands of miles of power lines to deliver energy more reliably and efficiently.
Meanwhile, in October 2025, America’s largest utility provider, NextEra Energy (NEE - Free Report) , announced a partnership with tech giant Alphabet (GOOGL - Free Report) to restart the Duane Arnold Energy Center by 2029 to supply carbon-free power for Google’s AI operations.
These decisive steps underscore the extraordinary surge in power demand and strengthen the case for investing in the utility sector now to capture future profits from this unprecedented AI-driven boom.
Moreover, macro conditions add another tailwind to the sector. Rising expectations for a Federal Reserve rate cut in December would lower borrowing costs for this capital-intensive industry, easing interest burdens on utility balance sheets and supporting valuations for companies funding large transmission and generation build-outs.
ETFs to Buy
The aforementioned discussion may encourage investors to buy large-cap utility stocks right away. However, a prudent investor knows that chasing individual winners might be risky.
Recent pullbacks in shares of renowned utility providers like Constellation Energy (CEG - Free Report) and Vistra Corp. (VST - Free Report) — from peaks following an earnings miss and an analyst downgrade, respectively — show how quickly sentiment can reverse, even if the underlying AI-driven data-center load growth remains a strong catalyst.
Therefore, betting on utility ETFs instead spreads exposure across grid owners, independent power producers, and regulated utilities, allowing investors to capture the AI-driven power-demand story, benefit from sector-level outperformance, and mitigate idiosyncratic downside risk from any single laggard. Considering this, you may buy the following Utility ETFs:
This fund, with assets under management (AUM) worth $22 billion, offers exposure to 31 companies from electric utilities; multi-utilities; independent power and renewable electricity producers; water utilities; and gas utilities industries. Its top five holdings include NEE (12.77%), CEG (8.18%), Southern Company (SO - Free Report) (7.20%), DUK (6.93%) and American Electric Power (AEP - Free Report) (4.76%).
It has soared 19.4% year to date and holds a Zacks ETF Rank #2 (Buy). XLU traded at a good volume of 13.2 million in the last trading session and charges 8 basis points (bps) as fees.
This fund, with net assets worth $1.88 billion, offers exposure to 44 U.S. companies that supply electricity, gas, and water. Its top four holdings include NEE (11.07%), CEG (7.10%), SO (6.25%) and DUK (6.00%).
It has surged 18.1% year to date and holds a Zacks ETF Rank #2. IDU traded at a volume of 0.8 million in the last trading session and charges 38 bps as fees.
This fund, with net assets worth $2.15 billion, provides exposure to 66 utility companies that trade in the U.S. equity market. Its top five holdings include: NEE (10.92%), CEG (7.79%), SO (6.79%), DUK (6.32%) and AEP (4.23%).
FUTY has gained 20% year to date and holds a Zacks ETF Rank #2. FUTY traded at a volume of 0.3 million in the last trading session and charges 8 bps as fees.
This fund, with net assets worth $8 billion, offers exposure to 69 U.S. electric, gas, and water utility companies as well as companies that operate as independent producers and/or distributors of power. Its top six holdings include NEE (10.99%), CEG (7.75%), SO (6.51%), DUK (6.34%), AEP (4.21%) and VST (4.19%).
It has gained 19.9% year to date and holds a Zacks ETF Rank #2. VPU traded at a volume of 0.2 million in the last trading session and charges 9 bps as fees.
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Buy these 4 Utility ETFs to Ride the AI Boom Before 2025 Ends
For decades, the Utility sector has been viewed as the quintessential defensive play — a stable, slow-growth corner of the market offering reliable dividends while mostly missing out on explosive rallies. However, that old narrative is officially obsolete.
As the rise of artificial intelligence (AI) has created an insatiable demand for computing power, driving a massive boom in data-center construction and expansion, utilities have transformed from a defensive haven into one of the stock market's most dynamic growth stories.
Particularly this year, the utility sector has dramatically outperformed nearly all other sectors and the broader market, except for technology and communication services, with the S&P 500 Utilities Index delivering a year-to-date return of 16.2%, surpassing the broader S&P 500’s return of 15.8%.
As the year draws to a close, investors can capture this momentum by strategically investing in utility-focused exchange-traded funds (ETFs).
The Rationale Behind Utility Investment
Electricity demand in the United States is expected to rise sharply in the coming years, driven primarily by power-hungry data centers resulting from the booming AI industry. To this end, the U.S. Department of Energy, in its December 2024 report, projected data centers to consume approximately 6.7-12% of total U.S. electricity by 2028, with total data center electricity usage estimated to increase 325-580 terawatt-hour (TWh) by 2028 from 176 TWh in 2023.
The stunning growth projections make a compelling case for investing in utilities. This investment thesis is further validated by the actions of utility companies themselves. Their aggressive generation capacity expansion, accelerated transmission projects, and grid-upgrade plans, often in direct collaboration with major tech firms, reflect the enormous and rapid scale of AI-centric data center construction across America.
For instance, Duke Energy (DUK - Free Report) , a prominent U.S. utility company, revealed in July 2025 that it is actively building new generation to support AI-driven energy demand and has additional construction planned. The company expects to bring more than 13 gigawatts (GW) online through 2030, while simultaneously upgrading hundreds of thousands of miles of power lines to deliver energy more reliably and efficiently.
Meanwhile, in October 2025, America’s largest utility provider, NextEra Energy (NEE - Free Report) , announced a partnership with tech giant Alphabet (GOOGL - Free Report) to restart the Duane Arnold Energy Center by 2029 to supply carbon-free power for Google’s AI operations.
These decisive steps underscore the extraordinary surge in power demand and strengthen the case for investing in the utility sector now to capture future profits from this unprecedented AI-driven boom.
Moreover, macro conditions add another tailwind to the sector. Rising expectations for a Federal Reserve rate cut in December would lower borrowing costs for this capital-intensive industry, easing interest burdens on utility balance sheets and supporting valuations for companies funding large transmission and generation build-outs.
ETFs to Buy
The aforementioned discussion may encourage investors to buy large-cap utility stocks right away. However, a prudent investor knows that chasing individual winners might be risky.
Recent pullbacks in shares of renowned utility providers like Constellation Energy (CEG - Free Report) and Vistra Corp. (VST - Free Report) — from peaks following an earnings miss and an analyst downgrade, respectively — show how quickly sentiment can reverse, even if the underlying AI-driven data-center load growth remains a strong catalyst.
Therefore, betting on utility ETFs instead spreads exposure across grid owners, independent power producers, and regulated utilities, allowing investors to capture the AI-driven power-demand story, benefit from sector-level outperformance, and mitigate idiosyncratic downside risk from any single laggard. Considering this, you may buy the following Utility ETFs:
Utilities Select Sector SPDR ETF (XLU - Free Report)
This fund, with assets under management (AUM) worth $22 billion, offers exposure to 31 companies from electric utilities; multi-utilities; independent power and renewable electricity producers; water utilities; and gas utilities industries. Its top five holdings include NEE (12.77%), CEG (8.18%), Southern Company (SO - Free Report) (7.20%), DUK (6.93%) and American Electric Power (AEP - Free Report) (4.76%).
It has soared 19.4% year to date and holds a Zacks ETF Rank #2 (Buy). XLU traded at a good volume of 13.2 million in the last trading session and charges 8 basis points (bps) as fees.
iShares U.S. Utilities ETF (IDU - Free Report)
This fund, with net assets worth $1.88 billion, offers exposure to 44 U.S. companies that supply electricity, gas, and water. Its top four holdings include NEE (11.07%), CEG (7.10%), SO (6.25%) and DUK (6.00%).
It has surged 18.1% year to date and holds a Zacks ETF Rank #2. IDU traded at a volume of 0.8 million in the last trading session and charges 38 bps as fees.
Fidelity MSCI Utilities Index ETF (FUTY - Free Report)
This fund, with net assets worth $2.15 billion, provides exposure to 66 utility companies that trade in the U.S. equity market. Its top five holdings include: NEE (10.92%), CEG (7.79%), SO (6.79%), DUK (6.32%) and AEP (4.23%).
FUTY has gained 20% year to date and holds a Zacks ETF Rank #2. FUTY traded at a volume of 0.3 million in the last trading session and charges 8 bps as fees.
Vanguard Utilities ETF (VPU - Free Report)
This fund, with net assets worth $8 billion, offers exposure to 69 U.S. electric, gas, and water utility companies as well as companies that operate as independent producers and/or distributors of power. Its top six holdings include NEE (10.99%), CEG (7.75%), SO (6.51%), DUK (6.34%), AEP (4.21%) and VST (4.19%).
It has gained 19.9% year to date and holds a Zacks ETF Rank #2. VPU traded at a volume of 0.2 million in the last trading session and charges 9 bps as fees.