PORTFOLIO SPOTLIGHT
While the market adjusted to those conditions, Rebello says, he and his partners sensed a changing environment around 2023 when the AI-powered data centers arrived with their gargantuan power needs in the range of hundreds of megawatts or even gigawatts. Two or three of the latter, he notes, and you’ re talking about the size of a city.
“ We saw there were several gigawatts of data centers under construction throughout 2023,” Rebello says, adding that it was clear this would be a burgeoning trend.
The Reaves team cites various industry projections to reinforce their view of the power generation market. According to the International Energy Agency, a typical AI-focused data center consumes as much power as 100,000 households. The largest ones now being built can consume 20 times that amount. The Boston Consulting Group forecasts that AI-related infrastructure will consume the same amount of power used by 40 million homes, or a third of the total homes in the U. S.
Pros And Cons
Despite the obvious technological advances offered by artificial intelligence, not everybody is enamored with the growing pervasiveness of the technology or its potential impact. The concerns range from fears about the massive job displacement of humans to the proliferation of AI-generated deepfake technology that further erodes the trustworthiness of perceived reality in an increasingly post-truth world.
Elsewhere, various studies and news articles describe a possible link between growing data center energy consumption and
Portfolio Statistics
Number Of Stocks 18 Average Mkt. Cap
$ 33.7 billion P / E Ratio 20.01x Std. Dev Fund / Benchmark 18.31 / 14.87 Turnover Ratio 66 % Net Expense Ratio 0.49 %
Performance and standard deviation( three-year period) versus the Morningstar US Utilities TR USD Index as of 12 / 31 / 25. AUM, Top 5 holdings and portfolio stats as of 1 / 7 / 25. Sources: Virtus Investment Partners and Morningstar.
Despite the obvious technological advances offered by artificial intelligence, not everybody is enamored with the growing pervasiveness of the technology or its potential impact.
higher consumer energy prices due to a squeeze in supply and demand. In addition, there are environmental concerns that we’ ll have to burn more fossil fuels to feed the voracious energy appetites of AI-driven data centers and other business operations.
Finally, some investors are concerned that we’ re in the midst of an AI bubble as so-called hyperscaler mega-cap tech companies potentially overspend to build massive AI data centers that ultimately might not deliver the desired return on investment.
But this much we know: The AI gold rush is on, and the managers of the Reaves ETF believe they’ ve identified the companies within their sphere that can both take advantage of that and do so in a way that mitigates some of people’ s AI concerns— at least the financial ones.
Rebello says regulated utilities are being careful in the energy deals they’ re making with large data center builders, signing up with some of the largest, best capitalized and creditworthy companies. The contracts being signed, he says, have protection features requiring the builders of gigawatt-sized data centers to be responsible for a large percentage of that power over extended time periods.
These deals include exit fees, collateral, and various onerous terms and conditions that would apply if the data centers don’ t fulfill their contractual obligations.“ That protects the equity investor and the existing customer who otherwise would be on the hook for this,” he says.“ As long as utilities are being prudent and careful as to how they attract and serve these customers, they should be able to benefit from the data center build-out because all of these data centers will require a power allocation they’ ve signed up for and committed to.”
The unregulated power generators are signing contracts with similar protection features, he adds. Some of the companies appearing in his ETF, including Constellation Energy, Talen Energy and Vistra Energy, have been powering the fund during the past couple of years thanks to the longterm contracts they’ ve signed to produce power for blue-chip companies.
Nuclear Revival
As for the fuel supply, Rebello offers that intermittent renewable fuel sources such as wind and solar alone can’ t meet the power needs of 24 / 7 data centers.
“ All electricity sources will be needed, but it’ s extra important that nuclear stays on line and that new natural gas plants are built and that existing coal plants stay on line,” he says.“ I think natural gas is being used as a bridge fuel to get to nuclear, and nuclear is about seven to 10 years out.”
Rebello and Rhame concur that nuclear power will likely be key in providing the requisite energy needs while also having a cleaner emissions profile than fossil fuels.
“ There’ s real SMR technology on the way,” Rhame says about small-module reactors in the works from various providers.“ In a way, natural gas, solar and wind are sort of a bridge to a nuclear revival.”
Portfolio Fit
The managers of the Virtus Reaves Utilities ETF maintain that the utilities sector is underrepresented in investor portfolios and in the market overall, and that exposure to the sector complements existing portfolios that are heavily tech focused.
“ It’ s a defensive sector currently offering a lot of growth potential, and that could last for a long time,” Rhame says. The ETF“ at times will have a higher yield, but right now we’ re trying to capitalize on the best outperformance versus the index that we can.”
42 | FINANCIAL ADVISOR MAGAZINE | JANUARY / FEBRUARY 2026 WWW. FA-MAG. COM