AI investing may be one of the top market narratives this year, but under the hood may be a theme that’s just as exciting: electrification. All of those data centers helping ChatGPT and other AI software revolutionize the economy require huge amounts of electricity. That rising demand, then, creates numerous big opportunities for investors who know where to look. The electrification ETF ELFY, for example, drives right at the upside in electrification, embodied in some intriguing stocks.

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ELFY, the ALPS Electrification Infrastructure ETF, charges a 27 basis point (bps) fee for its approach. The strategy tracks the Ladenburg Thalmann Electrification Infrastructure Index, which includes large and midcap firms poised to benefit from electrification. The market cap-weighted index focuses on sectors best positioned for huge electricity demand, like renewables, battery technology, and electricity transmission. Its rules-based approach emphasizes trade volume as well as market cap and liquidity standards.

Together, that strategy has helped the electrification ETF return 11.9% over the last three months. That performance has outdone both its ETF Database Category and Factset Segment averages, 9.1% and 9.2%, respectively. Which firms, then, have stood out in the ETF’s holdings?

Vertiv Holdings, Inc. (VRT), for example, has performed well for the ETF on a YTD basis. Per YCharts data, the strategy has returned 26.5% YTD, outpacing the S&P 500 Total Return index (SPXTR). The company focuses heavily on data center infrastructure, both design and construction for both commercial and industrial scale projects. The firm offered a 35% return on equity as of September 22nd, focusing on the Americas, Europe, Asia Pacific, and Africa and the Middle East.

Coherent Corp. (COHR) has also done well YTD. The firm focuses on components for electrical systems, specifically in optical and laser devices. It has returned 15.2% since the start of the year with a solid 24.9 forward p/e ratio. 

Finally, MasTec (MTZ) has returned 47.6% YTD, solidly outperforming SPXTR. The firm has multiple divisions, including a clean energy segment providing infrastructure for renewable energy generation and distribution. It also has an appealing forward p/e ratio at 32.5. 

Together, those three firms provide examples of the type of companies found in the electrification theme. For those looking for an electrification ETF to ride that huge data center demand, ELFY may appeal.

VettaFi LLC (“VettaFi”) is the index administrator and calculation agent for ELFY, for which it receives a fee. However, ELFY is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of ELFY.

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