Navigate the Energy Revolution: Why 4 Utility ETFs Should Be on Your 2026 Radar

The traditional narrative around utility stocks has completely shifted. What was once perceived as a slow, defensive corner of the market has transformed into a growth engine, driven by the explosive demand for computing power from artificial intelligence. As data centers proliferate across the nation, the electricity demands they create are reshaping the entire energy landscape. For investors looking to capture this opportunity without betting on individual stocks, utility ETFs present a compelling diversified approach.

The AI-Powered Energy Surge

The numbers tell a striking story. According to the U.S. Department of Energy’s 2024 analysis, data centers are projected to consume between 6.7% and 12% of total U.S. electricity by 2028—a dramatic increase from their current footprint. This translates to an estimated 325 to 580 terawatt-hours of additional consumption by 2028, compared to just 176 terawatt-hours in 2023.

The implications are massive. Major electricity providers are responding aggressively to this surge. Duke Energy announced expansion plans to bring over 13 gigawatts of new generation capacity online through 2030, alongside extensive power line upgrades. Meanwhile, NextEra Energy partnered with tech giant Alphabet to restart the Duane Arnold Energy Center by 2029 to power Google’s AI infrastructure.

These aren’t isolated developments—they represent a fundamental shift in how utilities are being valued. The S&P 500 Utilities Index delivered a 16.2% return in 2025, outpacing the broader S&P 500’s 15.8% performance.

Why Individual Stocks Carry Greater Risk

While the sector tailwinds are compelling, concentrating investments in individual utility stocks introduces unnecessary risk. Recent price corrections in companies like Constellation Energy and Vistra Corp. following earnings disappointments and analyst downgrades demonstrate how quickly sentiment can shift, even when underlying growth drivers remain intact.

The Case for Utility ETFs

Rather than chasing individual winners, spreading capital across a basket of companies through utility ETFs offers meaningful advantages. These funds provide exposure to a mix of regulated utilities, independent power producers, and supporting infrastructure companies—effectively diversifying away company-specific risks while maintaining exposure to the broader AI-energy boom.

Four Utility ETFs Worth Considering

Utilities Select Sector SPDR ETF (XLU) With $22 billion in assets, XLU provides concentrated exposure to 31 companies across electric, gas, and water utilities. Its portfolio includes NextEra Energy (12.77%), Constellation Energy (8.18%), Southern Company (7.20%), Duke Energy (6.93%), and American Electric Power (4.76%). The fund delivered 19.4% returns in 2025 and maintains a favorable rating. Trading volumes average 13.2 million shares, with a low 8 basis point expense ratio.

iShares U.S. Utilities ETF (IDU) This $1.88 billion fund spreads holdings across 44 companies, offering slightly broader diversification than XLU. Top holdings mirror the sector leadership: NextEra Energy (11.07%), Constellation Energy (7.10%), Southern Company (6.25%), and Duke Energy (6.00%). IDU gained 18.1% in 2025, with modest 0.8 million daily trading volume and a 38 basis point fee structure.

Fidelity MSCI Utilities Index ETF (FUTY) With $2.15 billion under management, FUTY tracks 66 utility companies, offering the broadest exposure of the four options. Holdings include NextEra Energy (10.92%), Constellation Energy (7.79%), Southern Company (6.79%), Duke Energy (6.32%), and American Electric Power (4.23%). The fund posted a 20% gain in 2025 and charges just 8 basis points annually.

Vanguard Utilities ETF (VPU) The largest of these options with $8 billion in assets, VPU provides exposure to 69 U.S. utility companies and independent power producers. Its top holdings are similar to peers—NextEra Energy (10.99%), Constellation Energy (7.75%), Southern Company (6.51%), Duke Energy (6.34%), American Electric Power (4.21%), and Vistra Corp. (4.19%). VPU gained 19.9% in 2025 and charges 9 basis points.

Making Your Choice

All four utility ETFs delivered strong 2025 performance and maintain favorable outlooks. The choice between them largely depends on your preferences: XLU and VPU offer the most liquidity and assets; FUTY provides the lowest fees; IDU delivers moderate diversification with reasonable costs. All share meaningful holdings in the sector’s leading companies positioned to benefit from data center expansion.

The AI revolution’s energy demands aren’t temporary. By positioning your portfolio through utility ETFs, you gain exposure to this structural shift without concentrating risk in any single company.