The AI Boom Could Be a Bad Reason to Buy Utility Stocks. Try This ETF Instead.

1 hour ago 2

Ben Gran, The Motley Fool

Wed, June 24, 2026 astatine 9:22 AM CDT 5 min read

The artificial quality (AI) banal roar has brought immoderate astonishing benefits to different parts of the economy, not conscionable tech names. Energy stocks person gained from AI request for electricity. Some operation companies and concern stocks person besides go AI-related stocks due to the fact that they physique information centers. Utility stocks person been different imaginable play for bullish AI investors.

Exchange-traded funds (ETFs) similar the Vanguard Utilities ETF (NYSEMKT: VPU) marque it imaginable to ain a targeted portfolio of inferior stocks astatine a debased cost. This Vanguard ETF holds 68 inferior institution stocks and has delivered annualized returns of 14.4% for the past 3 years. Unfortunately, this money has powerfully underperformed the S&P 500 scale and the tech-heavy Nasdaq-100 scale twelvemonth to day and implicit the past 10 years:

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Are inferior stocks truly a bully mode to put if you're optimistic astir the AI boom? Based connected caller trends and economical fundamentals, it seems improbable that inferior banal ETFs volition beryllium among the biggest beneficiaries of the AI boom. A amended prime for AI optimists could beryllium the Invesco QQQ Trust ETF (NASDAQ: QQQ). This tech ETF tracks the Nasdaq-100 and holds astir of the world's large AI stocks.

Let's look astatine these 2 ETFs and spot which could beryllium a amended prime for AI banal investors -- oregon for radical who privation much diversification from idiosyncratic stocks.

Utility workers cheque powerfulness lines.

Vanguard Utilities ETF: 22 years of 9.8% annualized returns

The Vanguard Utilities ETF offers a focused portfolio of 68 stocks successful inferior companies (electric, gas, and water) and autarkic powerfulness generators. The money was established successful January 2004, and for the past 22 years, it has delivered mean yearly returns of 9.8%. This ETF charges a debased disbursal ratio of 0.09%. It has a trailing 12-month dividend output of 2.64%, which is competitory with the champion dividend scale funds.

The fund's apical 5 holdings are: NextEra Energy (11.8% of the fund), Southern Company (6.7%), Duke Energy (6.2%), Constellation Energy (5.75%), and American Electric Power Co. (4.5%). Some investors person considered buying inferior stocks arsenic different mode to summation vulnerability to the AI trade. The thought is that inferior companies would payment from rising energy request and selling powerfulness to AI information centers.

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