Utility stocks are attracting investor attention due to rising electricity demand from AI infrastructure expansion, which drives higher power consumption and infrastructure upgrades. Historically seen as stable, defensive investments, utilities now face increased risks and costs from natural disasters, grid modernization, decarbonization, and large capital expenditures linked to AI. Analysis of the Utilities Select Sector SPDR Fund (XLU) versus the S&P 500 shows utilities underperform over the long term but offer downside protection during recessions, such as in 2008 and 2022. However, the sector's evolving challenges mean investors should cautiously reassess utilities' traditional defensive role going forward.
