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Today's Exclusive Story Utilities: The Unexpected AI Infrastructure TradeAuthored by Ryan Hasson. Originally Published: 3/2/2026. 
Key Points- Surging AI and data center demand is reshaping the utilities sector from a somewhat defensive yield play into a potential structural growth story.
- Institutional capital is rotating into utility ETFs like XLU and UTES as electricity demand forecasts rise.
- Companies such as Constellation Energy and NextEra Energy are positioned to benefit from baseload power needs and grid expansion tied to AI adoption.
- Special Report: The Market Reset Is Coming—Here's How to Read It Early (From Krypton Street)
The utilities sector is undergoing a shift in narrative that few investors would have anticipated even two years ago. Traditionally viewed as defensive, income-oriented, and predictable, utilities are now being discussed through a very different lens: growth. The catalyst is straightforward and powerful. Artificial intelligence and data center expansion are driving what could become an unprecedented surge in electricity demand over the coming quarters and years. AI models require enormous computational power, which directly translates into rising energy consumption. For a sector that has historically traded on yield and stability rather than significant expansion, this represents a notable inflection point. From a technical perspective, this theme has been building steadily. The most widely followed utility sector ETF, the Utilities Select Sector SPDR Fund (NYSEARCA: XLU), is up more than 18% over the past 12 months and has gained roughly 10.5% year-to-date, materially outperforming the S&P 500. Institutional flows confirm the change in sentiment. Over the past year, approximately $6.5 billion flowed into XLU versus about $1.65 billion in outflows. A significant portion of those inflows arrived in Q4 2025, suggesting large investors are positioning ahead of what they see as a durable structural trend. Price action supports the narrative as well: the ETF recently broke above its 52-week high after a period of bullish consolidation. This renewed attention comes as Elon Musk has publicly warned of a potential AI-driven power crunch, noting that global development efforts could face electricity constraints as early as late 2026. If that scenario plays out, utilities may become a critical "picks and shovels" layer of the AI ecosystem, similar to how memory and semiconductor names have benefited over the past year. For investors who agree with that thesis, here are three ways to gain exposure. UTES ETF: A More Concentrated Utility PlayThe Virtus Reaves Utilities ETF (NYSEARCA: UTES) offers a differentiated approach to sector exposure. Unlike XLU, which tracks a sector index passively, UTES is actively managed. The fund aims to outperform by selecting and weighting utility stocks based on fundamentals, growth characteristics and risk metrics. Liquidity is lighter than XLU's, with average daily trading volume around 260,000 shares, but investors gain a more concentrated portfolio. The fund currently yields 1.31% and carries a net expense ratio of 0.49%. Top holdings include Talen Energy (NASDAQ: TLN), Vistra (NYSE: VST), and Constellation Energy (NASDAQ: CEG), which together account for more than 30% of assets. Constellation Energy: Nuclear Leverage to AI DemandConstellation Energy is one of the more direct beneficiaries of rising baseload power demand. With a market capitalization near $113 billion, the company operates a diversified generation portfolio that includes one of the largest nuclear fleets in the United States. Nuclear power is particularly relevant in an AI-driven environment. Data centers require reliable, continuous electricity, and nuclear provides stable baseload generation without the intermittency challenges of some renewables. As hyperscalers expand AI infrastructure, dependable power becomes increasingly valuable. Constellation’s recent results reinforce the momentum. In Q4 2025, the company reported EPS of $2.30, beating consensus estimates, while revenue rose nearly 13% year-over-year to $6.07 billion. Institutional flows have also been significant, with billions in net inflows over the past 12 months, underscoring growing conviction. NextEra Energy: Scale and Infrastructure AdvantageNextEra Energy (NYSE: NEE), the largest weighting in XLU, represents scale and infrastructure reach. With a market capitalization approaching $200 billion, it is one of the largest electric power and infrastructure companies in the United States. Shares are up roughly 19% year-to-date, outperforming both the broader market and many peers. NextEra operates across regulated utilities and renewable energy infrastructure, supplying power to millions of customers. As electricity demand accelerates, companies with established generation assets and grid infrastructure stand to benefit from higher utilization and more favorable pricing dynamics. Recent analyst upgrades have cited growing confidence in long-term electricity demand, particularly as AI and data center expansion become more visible components of load forecasts. Bottom line: utilities are shifting from classic defensive, income-oriented plays toward essential infrastructure providers for a world with rapidly growing AI workloads. Investors considering exposure should weigh potential rewards against valuation, regulatory risks, and the capital intensity required to expand generation and transmission capacity.
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