The best-performing ETFs from the top sector in May

After dismal performance in the first four months, the renewable energy industry made a remarkable comeback in May, fueled by optimism around artificial intelligence (AI). As artificial intelligence has become a major investment focus, the demand for renewable energy in data centers supporting AI applications has increased.

With this in mind, we’ve highlighted the five best-performing ETFs from the sector that led the market in May. These are Global X Hydrogen ETF AQUEOUS, Defiance Next Gen H2 ETF HDR, First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN, ALPS Clean Energy ETF ACE i Fidelity Clean Energy ETF FRNW.

Artificial intelligence powering renewable energy

Renewable energy stocks have started an artificial intelligence boom. AI can accelerate and drive the energy transition by being both a large consumer and enabler of clean energy. On average, processing a ChatGPT query requires almost 10 times more electricity than a Google search. Goldman Sachs expects that artificial intelligence will increase the demand for data center power by 160% by 2030 (read: AI and the Fed are driving the stock market? Bet on ETFs).

Currently, data centers around the world consume 1-2% of total power, but this will likely increase to 3-4% by the end of the decade. Growing demand for data centers will continue to increase the demand for renewable energy.

According to the latest International Energy Agency, by 2026 the artificial intelligence industry will consume at least 10 times more electricity than in 2023.

Additionally, tech titans Alphabet ( GOOGL ) and Microsoft ( MSFT ), which are doubling down on their AI investments, have pledged to accelerate the development of advanced clean electricity technology and achieve 24/7 zero-emission energy by 2030.

Other factors

Sales of electric vehicles (EVs) have increased significantly in recent years, increasing the demand for electricity to power these vehicles. Since EV users are already environmentally conscious, their electricity is generated using green, renewable sources such as wind, solar and hydropower.

Thanks to advances in clean technology and increasing support from governments, the renewable energy sector is poised for significant growth.

Here we profiled the above-mentioned ETFs:

Defiance Next Gen H2 ETF (HDRO) – up 27.3%

The Defiance Next Gen H2 ETF tracks BlueStar’s global next-generation hydrogen and fuel cell index. The rules-based index tracks the performance of a group of publicly traded companies around the world and companies that generate at least 50% of their revenues from commitments to the development of energy sources based on hydrogen, fuel cell technologies and industrial gases.

The Defiance Next Gen H2 ETF has accumulated $25.5 million in its asset base and charges annual fees of 30 basis points. Its average daily turnover is 21,000 shares.

Global X Hydrogen ETF (HYDR) – up 26.5%

The Global X Hydrogen ETF seeks to invest in companies that can benefit from the growth of the global hydrogen industry. This includes companies involved in hydrogen production, the integration of hydrogen into energy systems, and the development/production of hydrogen fuel cells, electrolysers and other technologies related to the use of hydrogen as an energy source. HYDR tracks the Solactive Global Hydrogen Index and has 26 stocks in its basket (read: 3 most popular ETF areas of the last week).

The Global X Hydrogen ETF has accumulated $51.6 million in its asset base and charges annual fees of 50 basis points. Its average daily turnover is 77,000 shares.

First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) – up 16%

The First Trust NASDAQ Clean Edge Green Energy Index Fund offers exposure to companies engaged in the production, development, distribution and installation of new clean energy technologies, including solar photovoltaics, wind energy, advanced batteries, fuel cells and electric vehicles. It tracks the Nasdaq Clean Edge Green Energy Index and has 56 stocks in its basket.

First Trust NASDAQ Clean Edge Green Energy Index Fund manages $787.5 million in assets and charges 59 basis points annually. The product is trading at an average daily volume of 169,000 shares and has a Zacks ETF Rank of #3 (Hold).

ALPS Clean Energy ETF (ACES) – up 14.6%

The ALPS Clean Energy ETF offers exposure to a variety of U.S. and Canadian companies involved in the clean energy sector, including renewables and clean technologies. It follows the CIBC Atlas Clean Energy Index and has 40 stocks in its basket.

The ALPS Clean Energy ETF has accumulated $215.6 million in its asset base and charges investors fees of 55 basis points annually. Its average daily volume is 167,000 shares.

Fidelity Clean Energy ETF (FRNW) – up 13.9%

The Fidelity Clean Energy ETF tracks the Fidelity Clean Energy Index, which measures the performance of a global universe of companies across the market capitalization spectrum that distribute, produce or supply technology or equipment that supports the production of energy from solar, wind, hydrogen and other renewable sources. It has 64 stocks in its basket and charges investors 39 basis points per year.

The Fidelity Clean Energy ETF has accumulated $28.8 million in its asset base, trading on an average of 6,000 shares a day.

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