Recently, amidst the decline of U.S. chip stocks, utility stocks have defied the trend and risen.

The U.S. Public Utilities Select Sector SPDR Fund (ticker symbol XLU) has surged 4% in the last five trading days, breaking through the $74 mark. The utility sector may be on the verge of a springtime.

Over the past two years, due to market concerns about persistent inflation, the Federal Reserve has maintained interest rates at a higher level after continuous rate hikes, and the yield on 10-year U.S. Treasury bonds has also remained above 4% for most of the time.

According to FactSet data, during this period, the average return on utility stocks was 3.4%, with dividend yields not even matching those of Treasury bonds, putting pressure on utility stocks that rely on stable dividends.

XLU has also been unable to break through the $72 barrier, while major U.S. indices have achieved double-digit growth over the same period.

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However, since last week, a reversal may be on the horizon. Amid a general decline in tech stocks like Mag 7, the utility ETF XLU has risen against the trend and broken through key levels, indicating that investors have more confidence in holding utility stocks.

A slowdown in the U.S. economy coupled with the AI boom has led to a surge in electricity demand, allowing the U.S. utility sector to turn things around.

Analysts point to factors driving this change, including weak U.S. macroeconomic data and the surge in electricity demand triggered by the AI boom.

On the macroeconomic front, weak U.S. non-farm employment in July, a gradual rise in unemployment rates, coupled with the July ISM manufacturing PMI data falling short of expectations, have heightened concerns about a U.S. economic recession. The market is widely betting on a Federal Reserve rate cut in September, with the 10-year Treasury yield falling to around 3.8%, making the dividend yields of utility stocks more attractive.

On the other hand, the surge in electricity demand triggered by the AI boom has also driven up U.S. utility stocks.Last Tuesday, at the electricity market auction held by PJM, the largest electricity grid operator in the United States, electricity prices soared to $269.92 per megawatt-day, an increase of over 800% compared to a year ago, and also broke the 2010 record of $174.11 per megawatt-day.

Vistra, one of the largest electricity companies in the United States, saw its stock price rise by more than 15% following this news.

Goldman Sachs warned that grid stability requires more electricity capacity. However, any new grid expansion may take several years to come online, which essentially means that electricity prices will remain high for a period of time.

As a result, public utility companies including Vistra, Constellation Energy, and NRG Energy, have become one of the top 10 performing companies in the S&P 500 index, thanks to the surge in electricity prices.

More importantly, compared to purchasing high-priced tech stocks like NVIDIA, Microsoft, and Google, investors can now participate in the artificial intelligence boom at a relatively cheaper price by buying public utility stocks.

Jay Jacobs, head of BlackRock's active ETFs, said that as investors look for AI opportunities beyond large tech stocks, it is expected that investors will continue to invest in utility stocks or related ETFs at least for this year.

Investors' gaze has gone beyond the Mag 7, waiting for the next opportunity. As large tech companies like Microsoft and Google invest billions of dollars in AI data centers, and with the rise of new energy vehicles, the rise of utility stocks is a natural progression.

Randy Conner, President of Churchill, also said, "Utilities have become our preferred industry." Perhaps it is time to enjoy the honeymoon period brought by utility stocks.