Utility companies—those that provide electricity, water, natural gas, and other essential services for residential and commercial customers—have had a banner year. The benchmark Utilities Select Sector SPDR Fund (ARCA: XLU) has climbed by about 31% in the last year, with the bulk of those gains having occurred in the last six months.

Many investors have flocked to utility stocks in recent months in anticipation of the Federal Reserve's first rate cut in several years, which was confirmed at the Federal Open Market Committee meeting in September. With inflation dropping and a cooling jobs market, cautious investors unsure of the impact of the rate cut seek out utility stocks for their defensive capabilities.

Because of their essential nature, utility stocks tend to remain steady even in times of market turmoil. Many also have a strong history of paying out dividends. However, the rapid rise of the AI industry has prompted a surge in electricity demand, with Goldman Sachs estimating data center power demand will grow by 160% through 2030. This marks a major boon for many utility firms as well.

DTE: Strong Financial Position, Infrastructure Investment

DTE Energy Co. (NYSE: DTE) provides electricity and gas service to customers in Michigan and conducts an energy trading business. Despite its limited geographical range, DTE's target ...

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