XLU: How the AI Boom Is Energizing Utilities ETFs for Growth

Utilities ETFs aren’t just for dividends and defense anymore. The traditionally slow-moving sector is poised to become an exciting growth play for the coming decade.

At the center of this shift is the AI Action Plan, recently signed by President Donald Trump, which expedites the construction of high-capacity, energy-intensive data centers to support the rapid growth of artificial intelligence.  

With AI poised to dramatically increase electricity demand and nuclear power emerging as a scalable solution to meet it, utilities may no longer be the sleepy, dividend-focused sector they once were.  

Exchange-traded funds like the Utilities Select Sector SPDR Fund (XLU), long a staple for defensive investors, could now offer surprising growth potential over the next decade.

Let’s break down what’s powering this transformation.

AI & Nuclear Revolution: Why Utilities Are Set to Grow

The world is on the cusp of an electricity revolution. According to data from the International Energy Agency (IEA), global power demand is expected to double by 2030, driven in large part by the explosion in AI computing, electric vehicles and the electrification of industries.

Key growth drivers include:

• AI-powered data centers: These data centers can use as much electricity as small cities. Trump’s AI Action Plan aims to streamline approvals and infrastructure for new centers, which are projected to triple power usage in the U.S. by 2030.
• Nuclear energy revival: With growing concerns over grid reliability and carbon emissions, nuclear energy is making a comeback. New technologies like Small Modular Reactors (SMRs) and bipartisan support in Congress could allow utilities to expand nuclear as a stable, clean, baseload source.
• Aging grid upgrades: U.S. utilities will need to spend hundreds of billions of dollars modernizing the power grid, offering both risk and opportunity.
• Electrification of everything: From heat pumps to EVs to industrial processes, everything’s going electric, and utilities are at the center of it all.

As a result, the utilities sector may experience a rare mix of growth and stability, something that advisors and investors, and their ETF allocations, shouldn’t ignore.

Utilities ETFs Poised to Benefit from AI Growth

The three largest utilities sector ETFs provide exposure to electric companies, independent power producers and transmission infrastructure, key components in the next-generation grid, which can make them big winners if the utilities sector transforms in the coming years.

XLU: The Largest Utilities ETF Holds the Giants

XLU holds the giants in the space, many of which are already investing heavily in nuclear and renewable infrastructure. NextEra Energy Inc. (NEE), for example, is a major player in both nuclear and AI-adjacent grid projects.

• Assets under management: $20.8B
• Expense ratio: 0.09%
• Three-month total return: 7.4%

VPU: Diversified Exposure to Utilities

The Vanguard Utilities ETF (VPU) has is more broadly diversified than XLU, as it is not limited to just the top utilities stocks within the S&P 500.

• Assets under management: $7.3B
• Expense ratio: 0.09%
• Three-month total return: 7.2%

FUTY: A Low-Cost Alternative

The Fidelity MSCI Utilities Index ETF (FUTY) offers a similar portfolio as XLU and VPU but edges them out with a slightly lower expense ratio.

• Assets under management: $1.9B
• Expense ratio: 0.08%
• Three-month total return: 7.2%

Note: Fund data from etf.com & FactSet as of July 30, 2025.

From Boring to Booming: Utilities Are Not Just for Dividends

For decades, utilities were pigeonholed as defensive plays, steady dividend-payers for retirees and conservative portfolios. But the late 2020s and 2030s may tell a very different story. 

In the coming years, the sector is poised to evolve into one of the most critical engines of economic growth, thanks to its role in powering the AI boom and facilitating the energy transition.

In this environment, utilities ETFs could shift from slow growers to core growth holdings, delivering both income and capital appreciation. For investors seeking long-term, macro-driven opportunities, utilities may no longer be the sector to skip but the one to supercharge.

Bottom Line

The future of utilities looks far more dynamic than the past. With structural drivers like AI data centers and a potential nuclear renaissance, utilities ETFs such as XLU, VPU and FUTY could offer a rare combination of income and innovation-driven growth. For advisors and long-term investors, the time to plug into this trend might be now.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing in ETFs involves risks, and investors should carefully consider their investment objectives and risk tolerance before making any investment decisions.

At the time of publication, Kent Thune did not hold a position in any of the aforementioned securities, but he holds XLU in some client accounts.