Artificial Intelligence: Think Outside the AI Box With This Vanguard ETF

Globe and Mail

12-04-2025

Artificial intelligence (AI) is expanding its use case throughout the economy at a rapid clip. The AI industry responsible for this expansion is something of a battleground, however, and it isn't exactly clear which companies are going to end up as winners and losers over the long term.That makes it tough to know which stocks might be worth investing in to take advantage of the significant growth going on. One way to improve your chances is to buy a small piece of several AI companies through an AI-focused exchange-traded fund (ETF).
But there's another lesser-known ETF option that is likely to benefit from AI as well. Here's why it may be worth thinking outside the box when it comes to AI and ETFs.
The AI battle has just begun
Given how often artificial intelligence is talked about today and how long AI has been around in some form, it is hard to believe that investing in the sector has only been an option for a few years. The technology is rapidly advancing, too, so today's leader can quickly turn into a laggard. It is a very complex space, even though AI can clearly do incredible things.
The problem is that buying an AI stock is highly risky given the still early stage of the industry's development. Ford Motor Company and General Motors were big winners in the combustion engine business, but a lot of competitors fell by the wayside before these two industry giants became, well, industry giants. The same thing is likely to happen in AI.
One solution is to buy an AI-focused ETF. There are a bunch of choices, including Global X Robotics & Artificial Intelligence ETF (NASDAQ: BOTZ), ROBO Global Robotics and Automation Index ETF (NYSEMKT: ROBO), and iShares Future AI & Tech ETF (NYSEMKT: ARTY). Buying one of these ETFs is a solid option because you get a portfolio of AI-related stocks in one investment.
Data by YCharts.
But an AI ETF isn't the only choice you have, if you think a bit more deeply about the technology in question.
Vanguard Utilities ETF will meet the demand
While it isn't quite clear yet what companies will be the ultimate AI winners, whoever wins will need a lot of electricity to power their AI computers. And that means that electricity providers are set to benefit from a ramp-up in demand, which has been a common theme as utilities discuss earnings.
For example, giant U.S. utility NextEra Energy (NYSE: NEE) recently highlighted that demand for energy was projected to increase by 22% in the United States between 2020 and 2040. Only that projection was from 2021. In 2024 the projection was raised to 38%. And it was raised again to 55% in 2025. Data centers are expected to be the largest single source of that growth.
So should you run out and buy NextEra Energy? Well, not necessarily. Regulated utilities are granted monopolies in the regions they serve (in exchange they have to get their rates and investment plans approved by the government). So there isn't likely to be a single utility winner, there will be many. And some utilities will probably be better positioned to benefit than others, even though all utilities are likely to see some benefit.
Data by YCharts.
Just like with investing in AI, a quick solution is to simply buy a utility ETF like Vanguard Utilities ETF (NYSEMKT: VPU). This way you get a collection of utility stocks in one shot. And given that this ETF uses market cap weighting, performance will be driven by the largest and most dominant utilities. Those are likely to be the ones that best position themselves to benefit from AI's huge electricity demands. The expense ratio is a fairly modest 0.09%.
Notably, NextEra is the largest holding in the ETF at just over 10% of its assets. Around 90% of the portfolio is invested in companies with electricity as a core part of their business. And the ETF's dividend yield is an attractive 2.9%, which is more than twice the level of the S&P 500 index. Essentially, Vanguard Utilities ETF is a one-stop shop when it comes to buying the vital pick-and-shovel companies that will keep AI running.
Electricity is a multiyear growth story
What's interesting about Vanguard Utilities ETF is that, like AI, the story isn't likely to be a one-year event. Notice that the projection period that NextEra highlighted was 2040. That's still more than a decade away. If you like AI you might consider buying an AI ETF. You might also consider buying Vanguard Utilities ETF since the one thing that AI will most definitely need is more power.
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