The breakout in this utilities ETF has room to run, says Carter Worth
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The CNBC article dated July 25, 2025, titled "The breakout in this utilities ETF has room to run, says Carter Worth," discusses the strong performance and growth potential of utilities ETFs driven primarily by surging electricity demand linked to artificial intelligence (AI) and broader economic factors.
Key points include:
- Utilities ETFs, such as the Utilities Select Sector SPDR Fund (XLU), have recently experienced a significant breakout, reaching levels not seen since late 2024. The sector is up over 6% year-to-date, outperforming all other S&P 500 sectors despite relatively limited overall investor inflows 2.
- The surge in power demand is partly fueled by AI infrastructure, with major tech companies like Meta and Microsoft heavily investing in AI data centers, which require immense amounts of electricity. This trend is spurring strategic partnerships between tech firms and utilities, notably companies like Constellation Energy, creating long-term growth opportunities in private-grid energy deals 1 4.
- The utilities sector benefits not only from increased electricity consumption but also from expectations of Federal Reserve interest rate cuts, which historically favor high-yield, defensive sectors like utilities 1 5.
- Utilities stocks offer a blend of growth and income, appealing particularly to conservative investors seeking stable dividends alongside capital appreciation possibilities driven by the AI-powered demand boom 1.
- The U.S. power grid faces growing stress due to aging infrastructure and climate-driven extreme weather, creating urgent needs for new transmission lines and substations. This infrastructure demand aligns with the increasing electricity consumption from AI, electric vehicles, and reshoring of manufacturing 4.
- Analysts and investors are optimistic about continued upside for utilities ETFs, with the sector positioned well to capitalize on the structural shifts in energy usage and technological growth 1 5.
In essence, the article highlights that the recent breakout in utilities ETFs has substantial room to run, fueled by AI-driven electricity demand spikes, infrastructure investments, and favorable economic conditions supporting the sector’s defensive qualities and growth prospects.
Related
What are the main reasons the utilities ETF is seen as having room to grow now
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What specific utilities or ETFs are recommended for potential ongoing gains
What are the main reasons the utilities ETF is seen as having room to grow now
Answer
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The main reasons the utilities ETF is currently seen as having room to grow include:
- Rising electricity demand driven by artificial intelligence (AI): The rapid adoption of AI is fueling demand for energy-intensive data centers, which require more power and lead to growth opportunities in the utilities sector. This is a structural tailwind supporting the sector's revenue growth. 1 2 4
- Potential technical breakout: The Utilities Select Sector SPDR Fund (XLU) is consolidating just below its 52-week high resistance and is forming bullish technical patterns, suggesting that momentum could drive the ETF significantly higher if it breaks above this level. 1 2
- Defensive qualities and attractive yield: Utilities are historically seen as a safe haven during periods of market volatility and economic uncertainty due to their stable cash flows and steady dividends. Currently, XLU offers a dividend yield around 2.7%, appealing to income-focused investors. 1 2 3
- Supportive macroeconomic conditions: Expectations of Federal Reserve interest rate cuts and easing inflation help utilities, which are sensitive to interest rates, making their valuations attractive as they trade at discounts relative to historical levels. 4
- Infrastructure and grid modernization needs: Aging power infrastructure and increased demand for smart grids, transmission upgrades, and integration of renewable energy create long-term growth drivers for utilities companies. 1 3
- Government policy backing: Renewed attention to nuclear energy projects and broader infrastructure spending initiatives underpin the sector's growth outlook. 1 2
Together, these factors create a favorable environment for utilities ETFs like XLU to grow, combining both defensive stability and growth potential fueled by technological and infrastructure trends. 1 2 3 4
Related
How does rising energy demand specifically drive utility sector growth now
What long-term trends are fueling the utilities ETF's breakout potential
Why is the energy transition making utilities more attractive for investors
How do technological changes and policy shifts support utility sector growth
In what ways do utilities act as a safe haven during market volatility
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