AI Is Fueling Intense Demand for Electricity: Should You Invest in Utilities?

Most data centers are powered by utility companies. With AI driving energy consumption higher, you may be considering investing in utilities. Julio Cesar Aguilar/AFP via Getty Images

As AI gains momentum, it is set to spark a meteoric rise in power consumption.

AI requires a lot of electricity. The average ChatGPT query, for instance, uses almost 10 times as much electricity as a Google Search.

Data centers, which serve as the physical locations for AI operations, are powered by electricity. With the rise of AI, electricity use by data centers is surging. In fact, data center power demand is expected to grow by 160 percent by 2030, according to a Goldman Sachs analysis.

Today, data centers account for 1 percent to 2 percent of overall power. And by the end of the decade, those figures are expected to reach 3 percent to 4 percent.

Most data centers are powered by utility companies. So should you consider investing in the utilities sector? Here’s how to get started.

Utilities Stocks

The utilities sector includes companies that generate and provide electricity, water, and natural gas to homes and businesses across the world. Companies involved in renewable energy or green energy are also part of this sector. As you can see, these services will always be in demand. And because these companies are heavily regulated, their earnings are often steady. These are some of the factors that allow many utility companies to pay handsome dividends.

Dividends are payments made to shareholders based on company profits. Utility dividends were up in 2024, and nearly all U.S. utility companies are poised to raise dividends again in 2025, according to an analysis by Morningstar.

Some of the top electricity and utilities stocks today include Eco Wave Power Global AB, Vistra Corp., Constellation Energy Corp., NextEra Energy, Brookfield Infrastructure, and NRG Energy Inc.

As with any stock, you should carefully do your research before you invest. You can examine factors such as the company’s earnings, debts, profits, dividends, and more.

Utilities ETFs

If you’re not too interested in researching individual electric or utilities companies and picking specific stocks, you might consider a utilities exchange-traded fund (ETF). These professionally managed funds invest in a variety of companies within the utilities sector. Some also invest in the overall energy industry, which includes oil and gas.

Some of the top utilities ETFs include Vanguard Utilities, The Utilities Select Sector SPDR, iShares U.S. Utilities, Invesco S&P 500 Equal Weight Utilities, Fidelity MSCI Utilities, and First Trust Utilities AlphaDex.

Pros and Cons of the Utilities Sector

Because utility stocks are known to pay reliable dividends, many investors hold on to these securities for the long term to produce regular income. But beyond dividends, utility stocks also have less price volatility than the overall stock market. And because services such as electricity and water are in demand under all conditions, the utilities sector tends to remain resilient during economic downturns such as recessions. As a result, many investors see this sector as a safe haven.

Further, in 2025, utilities could see a “once-in-a-generation opportunity for exponential growth,” according to an analysis by Fidelity Investments. This is notable, in particular, because utilities tend to underperform during times of economic growth. Fidelity points to rising demand for electricity and the rise of AI as the main drivers for a potentially bright utilities sector in the coming decade.

However, heavily regulated utility companies must meet strict standards. Routine maintenance and upgrades require hefty infrastructure investments. Moreover, this infrastructure must sustain natural disasters and other risks to operate.

With this kind of demand for reliable infrastructure, utility companies tend to take on large amounts of debt. Many also issue bonds and other debt securities. This could leave them open to interest rate risk. During times of heightened interest rates, these companies would have to increase yields on their bonds to attract bond investors. In general, utility stocks become less appealing when interest rates are high.

The Bottom Line

Utilities are in constant demand. And with AI’s potential drain on the power grid, the sector could see a major boost in the coming years. Utility stocks also tend to pay reliable dividends to their shareholders. But you can also invest in utilities and energy ETFs that aim to capture returns from the overall sector.

Overall, utilities could provide you with a reliable source of income and mitigate risk in a diversified portfolio.

For more insight, view our report on sectors that could get a boost from a Trump presidency.

The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.