Unmissable Decade-Defining Investment Chance: One Outstanding Vanguard Index Fund Worth Purchasing in 2025
In the upcoming tech decade, many industry experts believe artificial intelligence (AI) will be as transformative as the creation of the microprocessor, the personal computer, the internet, and the mobile phone. With AI requiring significant power, investors are naturally drawn to semiconductor companies and cloud providers, but they may be overlooking an essential aspect: the energy needs of AI.
The average ChatGPT query consumes ten times more electricity than traditional internet searches, resulting in a projected 165% increase in data center power demand by 2030. Total electricity demand is projected to grow annually at 2.4% through 2030, driven by advancements in AI and domestic manufacturing. As outlined by Goldman Sachs, U.S. power demand had remained relatively stable over the past decade, but a shift is anticipated in the coming years.
To capitalize on this once-a-decade opportunity, investors can consider owning shares of the Vanguard Utilities ETF (VPU), offering exposure to electric utilities. The ETF primarily invests in electric utilities (61%) and multifaceted utility providers (25%), while also including water and gas utilities and independent power producers.
Leading holdings in the Vanguard Utilities ETF include:
- NextEra Energy – 11.5%
- Southern Company – 6.8%
- Duke Energy – 6.5%
- Constellation Energy – 5.5%
- Sempra – 4.3%
- American Electric Power – 3.8%
- Vistra – 3.7%
- Dominion Energy – 3.5%
- Public Service Enterprise Group – 3.3%
- PG&E – 3.2%
Constellation Energy and Vistra have outperformed the benchmark S&P 500 this year, with gains of 44% and 35%, respectively. These strong market positions can be attributed to Constellation Energy's extensive nuclear power fleet, offering a reliable zero-emission power source for AI data centers, and Vistra's status as the largest competitive power generator in the U.S., with a substantial nuclear power fleet.
The Vanguard Utilities ETF has historically underperformed the S&P 500 over extended periods but has remained comparatively stable, resulting in lower volatility. In contrast to the overall industry average, the Vanguard Utilities ETF exhibits a beta of 0.72 and a cost-effective 0.1% expense ratio, making it an appealing investment target for those seeking exposure to the AI boom at a wallet-friendly price.
In the world of AI, the importance of a reliable energy source, particularly nuclear power, cannot be overemphasized. Companies such as Constellation Energy and Vistra, represented in the Vanguard Utilities ETF, seize this opportunity by capitalizing on the potential demand for reliable, low-carbon energy sources in the growing AI landscape.
Investors interested in financing the energy needs of the AI boom might want to consider investing in the Vanguard Utilities ETF, as it includes companies like Constellation Energy and Vistra, which have large-scale nuclear power fleats, providing a reliable and low-carbon energy source for AI data centers.
As AI technology continues to grow, the demand for electricity is projected to increase significantly, making investments in utilities companies a potential opportunity for those looking to invest in finance and technology overlaps.
