According to Fortune, the Tema Electrification ETF (VOLT) has surged 33% year to date, significantly outperforming the S&P 500’s roughly 17% gain, with analysts at Ned Davis Research projecting approximately 20% relative outperformance versus the S&P 500 by 2027. The fund’s thesis centers on AI’s massive electricity requirements, with global data center electricity demand expected to more than double to 945 terawatt hours by 2030 from 415 terawatt hours in 2024 according to International Energy Agency projections. Ned Davis Research analysts Pat Tschosik and Phillippe Mouls recommend VOLT as an “Overweight” investment, describing it as offering direct exposure to datacenter electrification through holdings like Powell Industries and NextEra Energy. The investment case is strengthened by America’s aging power infrastructure, which received a D+ rating in the American Society of Civil Engineers’ 2025 report card, down from C- in 2021. This creates a compelling investment thesis that extends beyond typical tech plays.
The Real AI Winners Aren’t Who You Think
While investors chase NVIDIA and other chipmakers, the most durable AI investments may be in the power sector. Tech companies can’t run AI models without electricity, creating an inelastic demand that benefits utilities and electrical equipment manufacturers regardless of which AI applications ultimately succeed. This represents a fundamental shift in technology investing – we’re moving from betting on software algorithms to betting on physical infrastructure. The companies in VOLT’s portfolio essentially become toll collectors on the AI highway, earning revenue whether individual AI companies thrive or fail.
The Grid Upgrade Supercycle Has Just Begun
America’s power infrastructure faces a perfect storm of challenges that will require massive investment over the coming decade. The D+ rating from civil engineers reflects decades of underinvestment now colliding with unprecedented new demand from data centers. Projects like OpenAI’s Stargate demonstrate that energy requirements have moved from theoretical projections to immediate reality. What makes this different from previous infrastructure cycles is the concentrated nature of the demand – data centers require reliable, high-density power in specific locations, creating bottlenecks that will take years and billions of dollars to resolve. This isn’t just about building new power plants; it requires upgrading transmission lines, substations, and distribution networks that were never designed for this scale of concentrated load.
How This Reshapes the Competitive Landscape
The AI energy boom creates clear winners and losers across multiple industries. Regional utilities with available capacity near major data center hubs will see their valuations surge, while those in capacity-constrained regions face expensive upgrade requirements. Electrical equipment manufacturers serving industrial and utility markets are experiencing order backlogs stretching years into the future. Meanwhile, technology companies themselves face a new competitive dimension – access to affordable, reliable power is becoming as important as technical talent or computing resources. We’re already seeing major tech firms making direct investments in power generation and striking long-term energy contracts, essentially becoming utility customers of unprecedented scale.
Critical Investment Risks and Considerations
While the long-term thesis appears strong, investors should understand several key risks. Regulatory approval for new power projects can take years, creating potential bottlenecks between AI demand and supply response. The concentrated nature of VOLT’s portfolio – just 29 holdings according to performance data – increases volatility compared to broader market ETFs. There’s also execution risk – can utility companies and equipment manufacturers actually deliver the required capacity on schedule? Finally, political and environmental factors could complicate infrastructure development, particularly for projects requiring new transmission corridors or facing local opposition. These aren’t reasons to avoid the sector, but they’re essential considerations for any investor looking at this emerging theme.
Looking Beyond the AI Hype Cycle
The most compelling aspect of the power infrastructure investment thesis is its relative immunity to AI hype cycles. Whether AI delivers transformative productivity gains or proves more limited than expected, the physical infrastructure being built today will have value for decades. Data centers require reliable power regardless of what applications they’re running, and grid upgrades benefit all electricity consumers, not just tech companies. This creates a defensive characteristic unusual in technology-related investments – these companies could perform well even if specific AI applications disappoint, because the underlying demand for electricity and modern infrastructure transcends any single technology trend.
