ETF of the Week: UTES — Utilities Riding the AI Build-Out

Ticker/Name: UTES (Virtus Reaves Utilities ETF) Category: Actively Managed, Thematic (Utilities) AUM: $798.83 (as of 09/2025) Expense Ratio: 0.49%

TL;DR

UTES pairs classic utilities stability with an AI-infrastructure tailwind. Despite a soft week, YTD leadership, steady inflows, and grid-modernization spend keep the uptrend intact.

Why Now

Earnings Season: Utilities companies like  Xcel Energy ( XEL) are reporting strong results tied to infrastructure investments and customer growth.

Market Context: With the S&P 500 flirting with corrections, UTES offers a hedge against equity volatility while maintaining exposure to high-growth AI infrastructure.

Long-Term Thesis: The utilities sector is poised to benefit from $150 billion in AI-driven data center investments over the next 5 years.

Drivers to Watch

AI Infrastructure Demand: Utilities serving hyperscalers (Amazon, Microsoft & co.) are cutting power + interconnect deals—supporting rate base growth and earnings visibility.

Defensive Appeal: Historical resilience and dividends continue to pull in income-oriented investors during equity drawdowns.

Policy & Regulation: U.S. incentives for renewables, transmission, and grid hardening align with UTES’ focus on electric utilities and modernization.

Chart to Watch

Positioning & Flows

Institutional interest: ~$85.5M in net inflows (Aug–Sep 2025) points to growing confidence.

Sector breadth: utilities just logged a multi-month winning streak, suggesting persistent rotation into defensives tied to AI power demand.

Near-Term Catalysts

Quarterly results & guidance on capex, rate cases, and data-center load growth.

Transmission approvals / interconnection milestones that accelerate project timelines.

Macro: any dovish shift in rates typically helps utilities’ valuation multiples.

Risks & What Would Change Our View

Rate sensitivity: a sharp move up in long-duration yields can pressure defensives.

Regulatory friction: delays or unfavorable rate outcomes can crimp returns.

Execution risk: slower-than-expected data-center hookups or capex overruns.

How to Use It

Core defensive tilt with AI adjacency for diversified portfolios.

Pair trade idea: long UTES / short broad beta (or compare to XLU) to express a quality-tilted utilities view.

Allocation fit: income investors, AI-thematic allocators seeking lower volatility, and anyone hedging equity chop.

Wrap-Up

UTES is a standout choice for investors seeking a blend of income stability and growth potential in the AI economy. Its active management strategy, sector leadership, and alignment with macro trends make it a compelling pick for both income-focused and growth-oriented portfolios.

Recent Performance Stats