Utility ETFs Soar 8% YTD on AI Power Demand. Here’s Which One to Buy

Utility stocks returned to absorption successful 2026 arsenic artificial quality information halfway request strained the powerfulness grid. That backdrop has pushed investors backmost into assemblage funds similar the Utilities Select Sector SPDR Fund (NYSEARCA:XLU), the Vanguard Utilities ETF (NYSEARCA:VPU), the Invesco S&P 500 Equal Weight Utilities ETF (NYSEARCA:RSPU), and the actively managed Virtus Reaves Utilities ETF (NYSEARCA:UTES).

XLU sits astatine the halfway of the conversation. The money carries a 0.08% nett disbursal ratio, has climbed astir 8% twelvemonth to date, and pays a 2.6% dividend yield. The question for investors is whether that operation inactive offers the stableness the assemblage is known for aft a re-rating driven much by AI narratives than by regulated returns.

The Rate and Power Backdrop

The Federal Reserve chopped its people complaint by 75 ground points betwixt October and December of past twelvemonth and has held astatine 3.75% done the archetypal fractional of 2026. Lower abbreviated rates trim financing costs for capital-intensive utilities and marque regulated dividend streams look amended comparative to currency alternatives.

Longer yields archer a much analyzable story. The 10-year Treasury sits astatine 4.54%, adjacent the apical of its 12-month scope and supra its 4.25% average. That level caps however acold inferior multiples tin reasonably grow from here.

Behind some is powerfulness demand. Research cited successful PineBridge's 2026 Equity Outlook points to astir 25% yearly maturation successful information halfway instrumentality for the adjacent 4 to 5 years, constrained chiefly by transmission and electrical infrastructure. That bottleneck is the inferior bull case.

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XLU: The Default Utility Vehicle

The Utilities Select Sector SPDR Fund tracks the utilities portion of the S&P 500 and holds 34 stocks with $22.5 cardinal successful assets. The money is market-cap weighted, which means the AI powerfulness taxable shows up automatically astatine the apical of the book. The apical 10 names correspond astir 58% of the portfolio, with NextEra Energy astatine 13.59% of assets anchoring the publication alongside different mega-cap regulated and merchant operators.