Key Takeaways
The First Trust Utilities AlphaDEX Fund (NYSEARCA:FXU) has surged 17 percent this year, as a wave of electricity demand from artificial intelligence data centers turns the traditionally defensive utilities sector into a growth story.
"Many data center investments risk failing to generate expected returns if the industry can’t sufficiently monetize AI models," Goldman Sachs warned in a recent report, highlighting the massive capital expenditures that are not yet guaranteed to pay off.
The numbers behind the demand are staggering. Tech giants like Amazon, Google, Meta, and Microsoft are expected to spend a collective $700 billion on AI infrastructure in 2026 alone, according to a February 2026 OECD report. A single large data center can use as much electricity as a city of 50,000 people, and U.S. power costs have already risen nearly 30 percent since 2020, creating a windfall for power producers.
This shift is forcing investors to re-evaluate the sector, viewing it as the "Physical AI" backbone of the digital economy—the hard infrastructure of data centers, power substations, and cooling systems. The rally in FXU suggests investors are betting that the AI-driven power demand is a sustainable, long-term trend that will translate into higher revenues and profits for utility companies.
The demand is fueling a global construction boom. Digital Realty (DLR) recently opened its first data center in Barcelona, a 14-megawatt facility designed specifically for high-density AI workloads. The BCN1 data center is part of a growing network across the Mediterranean that strengthens connectivity between the Americas, Europe, and Asia, complementing other key hubs in Madrid and Marseille.
This physical infrastructure is critical, with a recent BGR Analytics study ranking U.S. states on their attractiveness for AI investment. The study, which separates "Physical AI" from "Knowledge AI," found that states like Texas, Utah, and Florida lead for infrastructure investment due to factors like energy costs, water availability, and permitting speed.
The repricing of utilities reflects a long-term bet on the power-hungry nature of AI. Investors will be watching utility company earnings for specific data center contract announcements and capital expenditure plans related to grid upgrades.
This article is for informational purposes only and does not constitute investment advice.
