AI Growth Boosts Demand for Utilities and Energy Stocks

Investors increasingly focus on AI's impact on power demand. The Vanguard Utilities ETF appears positioned to benefit from this trend as electricity demand is set to surge.

Date: 23-01-2025

AI Rating: 7

The report emphasizes the role of artificial intelligence (AI) as a transformative technology that will significantly increase electricity demand, projecting a 165% rise in data center power needs by 2030. This signals to investors an impending demand surge for electric utility companies. The Vanguard Utilities ETF is highlighted, especially its components such as Constellation Energy and Vistra, which have strong stakes in nuclear power—a sector poised to thrive as AI technologies necessitate more dependable energy sources. **Electricity Demand and Impact on Stock Prices:** Given the anticipated increase in electricity demand, stakeholders in the utilities sector may stand to benefit notably, especially those managing electric utilities. **Performance of Vanguard Utilities ETF:** The Vanguard Utilities ETF has shown strong performance lately, outperforming the S&P 500 over the past year with a 35% gain compared to 27% for the latter. Despite consistent underperformance over longer periods, the report cites its low expense ratio of 0.1%, making it an appealing option for investors seeking exposure to this emerging AI-driven demand. **Investors' Positioning:** Notably, companies such as Constellation Energy, with the largest nuclear fleet, and Vistra, a significant competitive power generator, stand to gain from this trend, particularly as they are perceived as reliable energy providers in the burgeoning AI landscape. Given these dynamics, the analysis suggests that investors keen on capitalizing on the AI boom should consider adding utilities stocks to their portfolios, especially those within the Vanguard Utilities ETF, as rising power demand shapes future earnings.

Stocks: VPU NEE DUK SO CEG SRE AEP VST D PCG