Key Takeaways
- Rolls-Royce is set to be a leading provider of electricity for AI data centers through its small modular reactors (SMR) business segment.
- The company’s SMRs can be built mostly in factories and can generate up to 470 megawatts of power, equivalent to 150 onshore wind turbines.
- Rolls-Royce has partnered with major companies such as CEZ Group and Siemens to deploy SMRs globally.
- The company’s power systems business, which produces the SMR, is driving revenue growth, with a 23% increase in revenue in the first half of 2025.
- Nuclear power is expected to play a significant role in the future of AI, and Rolls-Royce is well-positioned to capitalize on this trend.
Introduction to Rolls-Royce’s New Venture
The United States and China may be leading the pack in terms of artificial intelligence (AI) development, but they are not the only countries working on the technology or expanding their data center capacity. Europe is another hotspot for data center construction, and those data centers will face the same power problems that they do in the United States. As the International Energy Agency (IEA) projects that the amount of global electricity consumed by data centers will double by 2030, companies like Rolls-Royce are stepping up to provide solutions. According to the article, "Power infrastructure is one of the most overlooked parts of the AI equation. And, like America, Europe will also need a whole lot more electricity to run its data centers."
The Other Side of Rolls-Royce
While many people may associate Rolls-Royce with luxury vehicles, the company has a long history of producing high-quality engines for the Royal Air Force, dating back to 1914. However, the opportunity for Rolls-Royce in the AI infrastructure space involves its small modular reactors (SMR) business segment. As the article notes, "Rolls-Royce isn’t really focused on luxury vehicles… Rolls-Royce predates the cars bearing its name and has been making engines for the Royal Air Force since 1914." The SMR business segment is a key area of focus for the company, with the potential to provide a significant source of revenue growth.
How SMRs Work
The SMRs produced by Rolls-Royce are tiny power plants that can be built mostly in factories, with about 90% of the components pre-built and shipped to the final location for completion. Once completed, the SMR works like a normal nuclear reactor, just on a one-tenth scale. As the article explains, "One Rolls-Royce SMR can last for up to 60 years and generate up to 470 megawatts of power, which is the equivalent of 150 onshore wind turbines." This makes them an attractive option for providing power to data centers, which require a reliable and efficient source of energy.
Partnerships and Revenue Growth
Rolls-Royce has already partnered with major companies such as CEZ Group and Siemens to deploy SMRs globally. CEZ Group, a major power company in the Czech Republic, has taken a 20% stake in Rolls-Royce shares, while Siemens has pledged its help in deploying the reactors globally. The company’s most recent data shows that revenue for the first half of 2025 was up 13% over the first half of 2024, with gross profit and operating profit growing 33% and 50% respectively. As the article notes, "Revenue for that segment grew 23%, and the power generation subset of that sector’s revenue grew 26%." This suggests that the company’s power systems business, which produces the SMR, is driving revenue growth.
Conclusion and Future Prospects
Nuclear power is expected to play a significant role in the future of AI, and Rolls-Royce is well-positioned to capitalize on this trend. With its SMR business segment driving revenue growth, the company is an attractive option for investors looking to diversify their portfolio. As the article concludes, "Nuclear power will play a role in the future of AI, and thanks to Rolls-Royce, that future ought to arrive in style. This one is worth a look both as an AI infrastructure play and for some geographical diversification in your portfolio." With its strong partnerships and growing revenue, Rolls-Royce is set to be a leading provider of electricity for AI data centers in the years to come.
https://www.fool.com/investing/2026/01/18/artificial-intelligence-ai-infrastructure-stock/