If this year has taught us anything, it is the importance of power — and knowing where it comes from. Since the U.S.-Israel-Iran war kicked off, chaos in the Middle East has driven energy prices and inflation higher and higher. While it has yet to take a bite out of the stock market overall, its impact has added to the rampant data center demand, making “electrification” a key storyline. For investors seeking strategies to weather this storm, an electrification ETF is a viable option to power up portfolios.
Key Takeaways:
- Data centers and overall economic activity are driving up electricity demand.
- Electricity infrastructure firms such as power generators, substations, smart grid operators, etc. stand to be primary beneficiaries of this demand surge.
- An electrification ETF offers investors a direct route to gain exposure.
Once such fund to fit this bill is the ALPS Electrification Infrastructure ETF (ELFY ). According to Reuters,. power usage in the U.S. alone is poised to set records in both 2026 and 2027 in order to meet the surging demand —driven in large part by AI and data centers. As such, investing in infrastructure and power firms that are most essential to meeting that AI/data center demand is a strong option for a core plus or satellite allocation.
ELFY charges a 50 basis point fee to track the Ladenburg Thalmann Electrification Infrastructure Index. The fund’s list of mid- and large-cap names equally weights stocks within the portfolio. Specifically, the fund looks at renewable energy and electrical components companies like distribution, transmission, and battery technology. Its rules-based approach considers factors like trading volume, market cap, and subindustry category.
The electrification ETF has already ridden this year’s events to success in terms of performance. According to ETF Database, ELFY has returned 27% YTD and more than 50% over the last 12 months. Furthermore, according to YCharts data, the strategy has seen its price rise above both its 50 and 200-day Simple Moving Averages (SMA). These numbers typically indicate healthy momentum and a potential buy opportunity.
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With data center expansion and power demand showing little sign of slowing down, the case for electrification ETF investing is even stronger. An electrification ETF with ELFY’s proven performance and strong research backing is definitely one for investors to consider.
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VettaFi LLC (“VettaFi”) is the index provider for , for which it receives an index licensing fee. However, ELFY is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of ELFY.
