Utility stocks have outperformed the S&P 500 (^GSPC) year to date as power demand surges, even as tariff uncertainty raises questions about a recession.
The S&P 500 Utilities Select ETF (XLU) is up 6% compared to a nearly 4% drop for the broad-based index, a 6% drop for Tech (XLK), and a nearly 10% decline in Consumer Discretionary (XLC) stocks.
Even though utility stocks slipped along with the rest of the market following President Trump’s tariff policy announcement on April 2, their drop was not as severe as that of other sectors.
“By and large, utilities appear to be minimally impacted by tariffs,” CFRA analyst Daniel Rich told Yahoo Finance. “The vast majority of utility companies’ capital investment budgets rely on US labor, materials, and energy.”
The sector’s outperformance comes on the heels of a roughly 23% gain in 2024 as data center growth from an artificial intelligence boom and efforts to onshore manufacturing spurred increased demand for electricity.
That demand is going strong despite fears of a recession stemming from the global trade war.
“No signs of recession in power demand,” noted Goldman Sachs analysts on Tuesday night. “Year to date, US power demand has increased by 5.5% year over year vs. the average annual growth rate of 0.6% in the past decade.”
The analysts said all power demand sectors have contributed to this growth, including residential.
The Energy Information Administration expects electricity demand to grow fastest in the industrial sector this year as new semiconductor and battery manufacturing operations come online. Data center energy consumption is also expected to increase.
On Tuesday, energy holding giant Duke Energy (DUK) announced it signed agreements for nearly 1 gigawatt of data center projects involving two customers in April.
“We are projecting load growth at levels I’ve never seen in my 30-year career, which will drive more than a decade of record infrastructure build,” Duke CEO Harry Sideris told analysts during the company’s earnings call, referring to increasing power demand in the US.
Duke Energy stock is up 11% year to date. Its peers Exelon (EXC) and the Southern Company (SO) are also up nearly 20% and 10%, respectively.
On Wednesday, Google (GOOG, GOOGL) announced a collaboration with advanced nuclear project developer Elementl Power, yet another sign of Big Tech’s insatiable appetite for electricity.
This follows a tie-up in September between Microsoft (MSFT) and energy giant Constellation Energy (CEG), as well as Amazon’s (AMZN) purchase of a data center campus from energy provider Talen Energy (TLN) last March.
