A Nifty Utilities ETF With Data Center Inroads

The evolution of the artificial intelligence (AI) trade breathed new life into the once-sleepy utilities sector. It was once seen a boring bond-like group made for risk-averse income investors. However, utilities have some pizazz thanks to the soaring data center power demands.

Still, investors seeking dedicated utilities exposure need to be selective when evaluating the related ETFs. This is a strategy that makes sense given the sector’s diminutive weight in broad market indexes. Consider the Invesco Dorsey Wright Utilities Momentum ETF (PUI) as a fund with “hidden gem” potential as it relates to the intersection of data centers and utilities stocks.

PUI, which turns 21 years old in October, isn’t a traditional cap-weighted sector fund. Rather, the Invesco ETF tracks the Dorsey Wright^® Utilities Technical Leaders Index, which is rooted in relative strength. That doesn’t mean that this ETF is entirely focused on the utilities names most levered to the data center theme, but if some of those stocks are displaying strong momentum, they become credible candidates for inclusion in PUI.

PUI Has the Data Center Goods

As things stand today, PUI, which holds 37 stocks, is home to several of the utilities names some experts believe will benefit most from data centers’ insatiable power demands. One example is DTE Energy (DTE), PUI’s ninth-largest holding.

“Data center revenue could allow DTE to forego customer rate reviews and pass along rate benefits while investing to improve reliability and grow earnings,” observed Morningstar. “We assume 7% average annual earnings growth through 2030, with the potential to trend above 8% if DTE secures a third hyperscaler data center customer later this year. DTE’s $36.5 billion investment plan in 2026-30 could go 20% higher.”

Evergy (EVRG) is another example of a PUI holding seen as a credible data center demand play. The utility is investing to that effect.

“Evergy has among the largest large-load customer growth opportunities for utilities of its size. Projects in development and final stages could double the current system demand. Management’s five-year, $22 billion investment plan supports our growth outlook,” added Morningstar.

Alliant Energy (LNT), another PUI component, is also asserting itself in the data center space. The company is planning $78 billion in investments through 2030 and that’s important because management has a strong record of generating return on investment.

“We think the market should appreciate management’s strong execution over the past couple of years, where the company has consistently increased and delivered on growth opportunities,” concluded Morningstar.

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