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Bonus News from MarketBeat
These 3 Water ETFs Could be Quiet Winners From Infrastructure SpendingReported by Nathan Reiff. Published: 7/14/2026. 
Key Points
- Rising data center water usage is straining infrastructure, creating capacity challenges and investment opportunities across the broader water industry.
- Water-focused ETFs such as FIW, PHO, and CGW offer investors diversified exposure to utilities, infrastructure, equipment, and materials companies tied to water demand.
- Each fund carries trade-offs, including niche focus, concentration in top holdings, and expense ratios ranging from 0.50% to 0.59%, that investors should weigh.
- Special Report: He bet half his $9 billion on ONE stock
Data centers have drawn sharp criticism for their high water usage, but their impact on the broader water industry—and on investors—also comes down to infrastructure bottlenecks, regulation, and emerging technologies, among other factors. Utilities companies must adapt as hyperscalers enter their markets. In some cases, a new data center operator can quickly become one of the largest customers in a region. Water infrastructure providers of all kinds, from treatment plants to pipeline operators to storage companies, are facing new capacity challenges. The landscape is changing quickly as regulation struggles to keep pace with new investment and new entrants, while some geographies may emerge as winners. For investors, one of the safer ways to approach the water industry in the age of AI is through exchange-traded funds (ETFs), which can help spread risk and provide broader access to the sector. However, not all water ETFs are the same, and investors may want to start their search with proven winners like the funds below. A Play on Potable and Wastewater Remains Niche for Now
A modified market cap-weighted fund, the First Trust Water ETF (NYSEARCA: FIW) has a specific focus on the potable and wastewater industries. Companies in the portfolio must meet size and liquidity requirements, among other factors. The result is a streamlined basket of around three dozen stocks, with no single name accounting for more than about 5% of the portfolio. Despite its niche focus, FIW is not as concentrated as investors might expect. Potable water and wastewater may not seem like exciting areas of investment, but these sectors could become increasingly important globally as climate change, shifting populations, and other stressors strain existing systems. Data center demand may exacerbate, or at least accelerate, that trend. For now, FIW remains a specialized fund with a fitting level of investor interest: it has assets of around $1.8 billion and modest average trading volume. Because many of its holdings are in the utilities sector, which is known for dividends, the fund does pay a dividend yield of 0.72%. Even so, the fund's year-to-date (YTD) performance has not kept pace with the broader market, and FIW's 0.50% expense ratio may be a dealbreaker for investors who do not expect water industry spending to accelerate. A Generalized Water Fund, But Investors Should Watch for Diversification and FeesThe Invesco Water Resources ETF (NASDAQ: PHO) is the largest and most heavily traded fund on this list, although its assets under management (AUM) still hover around $2 billion and its average trading volume remains modest compared with many funds in other sectors. One reason for PHO's appeal is its generalist approach, which includes a wide range of water industry companies. Investors can use it for relatively easy access to water utilities, infrastructure, equipment, materials, and other types of firms. That said, PHO is not especially diversified, with only 40 total positions in its basket of U.S. equities. As a result, a handful of companies, including Ecolab Inc. (NYSE: ECL) and IDEXX Laboratories Inc. (NASDAQ: IDXX), carry mid- to high-single-digit allocations, leaving the fund exposed to a relatively small group of names. The top 10 positions account for well over half of invested assets, making PHO susceptible to volatility in its largest holdings. On top of that, the fund has a relatively high expense ratio of 0.59%, which may deter cost-conscious investors. Another Broad Option, But Concentration Remains a ConcernComing in just one basis point cheaper than PHO, with an expense ratio of 0.58%, is the Invesco S&P Global Water Index ETF (NYSEARCA: CGW). This fund also takes a broad approach within the water industry, including a variety of companies involved in infrastructure, utilities, equipment, materials, and more. Its portfolio is broader than PHO's, with 67 positions. However, the largest holdings in CGW also carry high allocations of just under 8% each, so concentration may still be an important factor for investors. With a dividend yield of 1.52% and YTD returns that outpace both of the ETFs above, CGW may appeal to investors based on its recent performance. Still, like the other funds on this list, CGW is likely to be most attractive to investors who believe that shifting demand and usage trends in water will create more business for companies already operating in the industry.
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