Deutsche Bank has put the spotlight back on Rolls-Royce Holdings PLC (LSE:RR.) small modular reactor (SMR) ambitions, exploring the CEO's assertion that the venture could one day make the engineering group the UK’s most valuable listed company.
The bank cites recent comments from chief executive Tufan Erginbilgic, who argued that the global market for SMRs could be worth more than a trillion dollars
Rolls estimates that around 400 of these compact nuclear reactors will be needed worldwide by 2050.
At up to $3 billion each (£2.2 billion), the potential is vast. SMRs are designed to provide cleaner, more reliable energy, and their relevance has grown with the surge in demand from artificial intelligence and data centres, both of which require vast amounts of power.
Power Systems gaining traction
While SMRs are still some way from commercial deployment, Rolls-Royce’s Power Systems division is already emerging as a growth engine.
The business, which provides solutions for data centres among other applications, has been buoyed by rising digital infrastructure demand. Deutsche Bank argues that this division is becoming a central pillar of the investment case for the group.
Long-term potential alongside defence
Management believes SMRs could eventually match the scale of Rolls-Royce’s defence business, though this is a 2035 and beyond story.
If realised, it would mark a profound shift in the balance of the group, turning it into a key global player in sustainable energy as well as aerospace and defence.