Try these trades if Nvidia isn’t your speed

The biggest debate going on in the financial world right now revolves around the artificial intelligence (AI) infrastructure buildout.

Is it sustainable? That is the question.

The answer, whatever it might be, will determine whether or not the AI rally continues to boom… or if it’s a bubble waiting to burst.

In my most recent Wide Moat Daily article, I highlighted my belief that this “revolution is still in its early innings. And that, as it progresses, trillions of dollars will be spent on related infrastructure across the globe.”

I based part of that assessment on recent quarterly results from Big Tech players like Alphabet (GOOGL), Amazon (AMZN), and Microsoft (MSFT). These hyperscalers are spending hundreds of billions of dollars annually on data centers to support their cloud/software needs.

This is, admittedly, cutting deep into their free cash flows. However, it’s also true that their sales and earnings are soaring. In which case, their returns on investment (ROI) seem well worth the cost.

When Nvidia (NVDA) took its turn reporting earnings on Wednesday, it went above and beyond in proving my point. Q1 fiscal-year 2027 revenue was $81.6 billion, beating Wall Street’s expectations by $2.65 billion and representing 85% year-over-year growth.

And if you remove its China revenue from the year-ago quarter, since Nvidia isn’t selling chips there right now… that growth jumps to an incredible 109%.

Moreover, its gross margins remain steady at an astounding 75%. Its free cash flow is growing at 86%. And its earnings per share are growing at north of 200%.

That’s why I find it hard to be bearish about this stock.

I do, however, realize that it can be volatile. (It even managed to drop on Wednesday’s news.) Not every investor can or should commit to those kinds of swings.

But that doesn’t mean you should ignore the data center buildout altogether. After all, there are much more conservative ways to play this trend, including in the safe and secure utilities sector.

Investors can’t afford to ignore AI’s effects. They’re too impactful and far-reaching to dismiss.

Semiconductors are flying off the shelves. Data centers are being built as fast as big construction firms can make them happen. And large language models have seen their sales rise 10x over the last year or so.

In mid-2025, for example, Anthropic was reporting a $4 billion annual run rate… whereas recent reports put that figure at $45 billion to $50 billion today.

Wide Moat Research sees enormous amounts of potential in all of this and across numerous sectors – some of which too many other investors and outlets are missing entirely.

In their defense, it’s easy to get caught up in the obvious. Then again, it’s not difficult to see how all this obvious growth requires enormous amounts of resources… including and perhaps especially concerning electricity.

The headlines actually do cover this topic often enough, especially in local papers. Only it’s from a negative perspective, pointing out how much water and energy supplies are being stretched and/or getting more expensive from the data center rollout.

They’re not wrong in that. ICF international, a global consulting firm, projects that U.S. electricity demand will rise 25% by 2030… and upwards of 78% by 2050.

It’s just that they’re missing the corresponding increase in profits that kind of demand brings. And considering how the utility sector has underperformed so far in 2026, “they” are not alone.

Utilities as a category are up by approximately 4% year-to-date, falling far short of the S&P 500’s 8.6% gains… to say nothing of the information technology sector, which is so dependent on utilities, being up 17.2%.

I’m not saying these “behind the scenes” investments should be up that high, mind you. But there’s no reason for them to be lagging when their cash flows are so very predictable, they pay out reliably growing dividends, and they’re seeing such intense demand.

There’s a clear mispricing here. And that, in turn, opens a very real investment opportunity.

The way I see it, there are three ways to bet on this utility trend.

Option No. 1: You could pick and choose individual stocks, trying to determine which companies offer the best valuations and biggest upside potential.

That’s what we’ve been doing in The Wide Moat Letter, where we’ve recommended a slew of blue-chip electric utility stocks in the past year. As I write, our average total return on those picks is 38.7%... and we expect more upside still.

Option No. 2: There are also exchange-traded funds (ETFs) that provide diversified exposure across the sector. State Street Utilities Sector Select SPDR (XLU), for instance, mainly focuses on the largest electric utilities but still includes water and gas companies as well.

XLU yields nearly 2.7%. Its expense ratio is just 0.08%. And, historically, it’s held up extremely well in bear markets.

Low-cost ETFs like this are probably the simplest and easiest way to get exposure to growing electricity demand.

Option No. 3: Combining an ETF like XLU with a closed-end fund (CEF) like the Reaves Utility Income Fund (UTG) provides even more diversification across the utility/AI infrastructure space. As you can see between the preceding and following charts, there’s very little overlap between these two investments’ largest holdings.

What’s interesting about this CEF is that it provides exposure to not just electric utilities, but also AI-adjacent energy, construction, and raw materials companies, as well as data-center real estate investment trusts (REITs), electric components manufacturers, and even railroads.

Basically, UTG is a diversified play on the entire data center market… all while providing historically reliable dividend growth and a high dividend yield of 5.8%.

I’ve been building a position in UTG this year. And I find it pairs nicely with my more aggressive big-tech stocks, enabling me to spread out my AI-related risk among dozens of companies… and maintain exposure to the AI trend without sacrificing the passive income I love so dearly.

Funds like this go to show that there’s more than one way to buy into the AI growth trend. You don’t have to be overweight on semiconductors or high-premium hyperscaler stocks if that’s not your speed.

There’s more than enough AI to go around the stock market. And utilities are just waiting to prove it.

Kind regards,

Nick Ward
Analyst, Wide Moat Research

Disclosure: The author, Nicholas Ward, owns shares of UTG. Nick Ward is long UTG.

Real estate investment trusts (REIT) have been largely unloved for years. Ever since interest rates started going up, their stocks have been going down.

But I’m calling it: the end to that trend.

In this week’s Wide Moat Show, Nick Ward and I discuss Q1 REIT earnings… and the very good news I’m taking from it.

Catch the full episode right here.