Nvidia makes the chips that power the computers supporting artificial intelligence.

Artificial intelligence needs more than powerful chips to exist; it also needs huge amounts of electricity.

Over the next 10 years or so, there will be a step change in the demand for power and this ETF is a direct play on that demand growth.

10 stocks we like better than Vanguard Utilities ETF ›

Shares of Nvidia (NASDAQ: NVDA) have rocketed higher by 28,890% over the past decade. It seems to just keep going up, too, with the market cap of the company recently passing $5 trillion, the first company ever to reach that milestone. Nvidia alone makes up nearly 8% of the S&P 500 index. It is the poster child for investing in artificial intelligence (AI), but it isn’t the only way to invest in the theme.

Here’s an exchange-traded fund (ETF) that could be a smarter choice for more conservative investors.

When the internet was the hot new technology, a company called Yahoo! was the king of search engines. Until it was displaced by Google, which is now just one part of Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). The key takeaway here is that being an industry leader today isn’t a guarantee that a company will remain an industry leader tomorrow.

Image source: Getty Images.

Then there’s chip maker Nvidia’s shocking price appreciation. There’s an old saying on Wall Street that trees don’t grow to the sky, which basically means that stocks can’t rise forever. While it may look as if Nvidia has nowhere to go but up as artificial intelligence grows in importance, there are also worries that the market is in the middle of an AI bubble. When a bubble bursts, the pain can be extreme, with the leaders on the way up often the leaders on the way back down, too.

That said, AI is a very real technology that is likely to have long-term implications. One of those implications is being felt in the utility sector, because AI needs electricity to operate. Even if AI stocks crash back to earth, demand for electricity will likely remain robust for years to come. By some estimates, AI (and the data centers in which it lives), coupled with electric vehicles, will push electricity demand up by 55% between 2020 and 2040. That compares to an increase of just 9% between 2000 and 2020.

But what utility do you buy to take advantage of the step change in electricity demand? The best answer is probably buying a diversified index like Vanguard Utilities ETF (NYSEMKT: VPU). The reason for this is that regulated utilities are given the equivalent of monopolies in the regions they serve, but must subject their businesses to government regulation of their capital investment plans and rate increases. If you pick just one utility, you will need to be very certain that it is well-situated geographically. If you buy a diversified portfolio of utilities, you’ll benefit as the entire utility sector benefits.