The Smartest ETF to Capitalize on AI-Driven Energy Demand in 2026

The artificial intelligence revolution is reshaping global energy demand, creating a seismic shift in how electricity is generated, distributed, and consumed. As data centers powered by AI expand at breakneck speed, utilities are emerging as unexpected beneficiaries of this technological surge. For investors seeking to position themselves at the intersection of clean energy and AI infrastructure, the right exchange-traded fund (ETF) could offer a compelling pathway to capitalize on this dual megatrend.

The AI-Driven Energy Boom

The demand for electricity from AI data centers has surged particularly in regions like the Gulf South of the United States, where companies such as Amazon Web Services and Meta Platforms are establishing massive campuses. U.S. power demand has risen by 2.3% year-over-year, driven largely by these hubs. This growth is not just a short-term blip; the global AI infrastructure market is projected to reach $356 billion by 2032, with big tech investing $155 billion in AI development alone in 2025.

The COP30 climate summit, while criticized for its lack of binding commitments on fossil fuels, underscored the urgency of transitioning to clean energy. This creates a unique alignment: AI's insatiable energy appetite coincides with the global push for decarbonization, making utilities with renewable infrastructure particularly attractive according to reports.

Utilities ETFs: The Hidden Winners

The Utilities Select Sector SPDR Fund (XLU) has surged 20.9% in 2025, reflecting the sector's unexpected dynamism. This performance is driven by utilities like Entergy and CenterPoint Energy, which have seen robust earnings growth due to increased load from data center operators such as Amazon and Meta. For instance, Essential Utilities recently announced a $26 million investment in a Pennsylvania data center and a water treatment plant to support it, illustrating how utilities are adapting to AI's infrastructure demands according to business wire.

XLU's appeal lies in its exposure to companies that are both stable and growing. While traditional utilities are seen as defensive plays, the AI-driven electricity boom has transformed them into growth stories. As the Federal Reserve's recent rate cut eases borrowing costs, utilities are better positioned to fund the massive infrastructure projects required to meet AI's energy needs.

AI Infrastructure ETFs: Complementary Exposure

For investors seeking direct exposure to the AI hardware and infrastructure ecosystem, thematic ETFs like the Global X Data Center & Digital Infrastructure ETF (DTCR) and the Roundhill Generative AI & Technology ETF (CHAT) offer targeted opportunities according to financial analysis. DTCR, for example, includes data center REITs like Equinix and Digital Realty, which provide the physical infrastructure underpinning AI operations. CHAT, on the other hand, focuses on generative AI developers such as Nvidia and Microsoft, capturing the sector's technological momentum.

However, the AI software segment remains volatile. Pure-play companies like C3.ai have faced revenue declines and operational challenges, with its stock down over 45% in the past year. This volatility underscores the importance of balancing high-growth AI infrastructure ETFs with the stability of utilities.

The Strategic Case for XLU

While DTCR and CHAT offer high-growth potential, XLU stands out as the smartest ETF for investors prioritizing strategic exposure to AI-driven energy demand. Its performance in 2025-bolstered by AI-related load growth-demonstrates its ability to capitalize on the sector's transformation. Moreover, utilities are inherently better positioned to handle the long-term infrastructure demands of AI, given their existing grid expertise and regulatory frameworks.

For a balanced approach, pairing XLU with DTCR could provide both steady returns from energy demand and growth from AI hardware. However, for those seeking a single, focused bet, XLU's combination of stability and growth makes it the most compelling choice.

Conclusion

The convergence of AI and energy demand is not a passing trend but a structural shift with long-term implications. As data centers redefine electricity consumption, utilities are evolving from defensive plays to growth-oriented assets. The Utilities Select Sector SPDR Fund (XLU) encapsulates this transition, offering investors a direct and diversified way to benefit from AI's energy footprint while aligning with global decarbonization goals. In 2026, the smartest ETF is one that bridges the gap between technology and sustainability.