August 13, 2025 • News
British engineering giant Rolls-Royce has unveiled ambitious plans to leverage its nuclear reactor technology to power artificial intelligence systems, with CEO Tufan Erginbilgic boldly claiming the company has the potential to become the UK's most valuable firm. The strategy centers on providing small modular reactors (SMRs) to power energy-intensive AI data centers, positioning the company at the intersection of two rapidly growing sectors.
Rolls-Royce has already secured significant contracts to demonstrate its nuclear capabilities. The company signed deals with both the UK and Czech governments to supply SMRs for AI-driven data centers. In July 2025, Rolls-Royce SMR was selected as the preferred bidder by Great British Energy to provide the UK's first small modular reactors. Additionally, the Czech Republic partnership involves deploying up to 3 gigawatts of nuclear capacity through six reactor units.
These contracts represent more than just business opportunities - they signal a fundamental shift in how technology companies approach energy infrastructure. Traditional renewable sources like solar and wind cannot provide the consistent, round-the-clock power that AI operations demand. Data centers require uninterrupted electricity supply, making nuclear power an attractive baseload solution.
Small modular reactors differ significantly from traditional nuclear plants. Each Rolls-Royce SMR generates 470 megawatts of electricity - enough to power one million homes - while occupying roughly the space of two football fields. The modular design allows 90% of the reactor to be factory-built, dramatically reducing construction time and on-site risks compared to conventional nuclear facilities.
The technology addresses a critical challenge facing the AI industry. Modern GPU data centers consume enormous amounts of electricity, with individual units requiring up to 1,200 watts each. Large-scale AI training clusters can demand 500 megawatts of continuous power, equivalent to a mid-sized city's consumption. By 2030, data centers are projected to consume 945 terawatt-hours annually - matching Japan's total electricity usage.
SMRs provide unique advantages for AI infrastructure. Their 24/7 baseload generation eliminates intermittency issues associated with renewable sources, while their modular scalability allows precise matching to data center growth. The technology also enables grid independence, allowing data centers to operate without competing with local communities for electricity or waiting years for transmission upgrades.
Erginbilgic estimates the global SMR market will require 400 reactors by 2050, creating a trillion-dollar opportunity. His confidence stems from Rolls-Royce's unique position in the nuclear sector. The company already supplies reactors for numerous nuclear submarines and possesses specialized nuclear capabilities that few private companies worldwide can match.
The CEO's assertion that Rolls-Royce could become the UK's largest company isn't merely aspirational. Currently ranking fifth in the FTSE 100 with a market capitalization of approximately £91 billion, the company would need to surpass AstraZeneca's £171 billion valuation to claim the top position. However, Erginbilgic's track record suggests such growth isn't impossible.
Since Erginbilgic assumed leadership in January 2023, Rolls-Royce has undergone a dramatic transformation. The company's share price has increased by over 1,000%, while operating profits have grown substantially. The engineering firm now projects profits exceeding £3 billion, a remarkable turnaround from the debt-laden organization Erginbilgic inherited.
This transformation wasn't accidental. The CEO implemented aggressive cost-cutting measures and strategic operational improvements that have generated over £850 million in savings since 2022. The company has also benefited from the post-pandemic recovery in aviation, with its Trent series engines reaching peak profitability as air travel rebounds globally.
The timing of Rolls-Royce's nuclear pivot aligns perfectly with industry trends. Major technology companies including Google, Microsoft, and Meta have already signed agreements to secure energy from SMRs in the United States. Top 10 Best AI Apps & Websites in 2025: Free and Paid demonstrates the explosive growth in AI applications driving this energy demand.
The convergence of SMRs and AI data centers creates remarkable technical synergies. Data centers already require sophisticated cooling systems to manage heat from high-performance GPUs, with liquid cooling markets growing at 20.3% annually to handle rack densities exceeding 100 kilowatts. SMRs can provide both electricity and process heat for absorption chillers, while data center waste heat proves ideal for district heating applications.
This combined heat and power approach can boost overall system efficiency above 80%, transforming waste streams into valuable resources. The integration also addresses growing concerns about the environmental impact of AI development, providing a carbon-free alternative to fossil fuel-powered data centers.
Despite the promising outlook, significant challenges remain. SMR technology is largely unproven at commercial scale, with no operational examples to reference. The first Rolls-Royce SMRs aren't expected to come online until the mid-2030s, meaning the technology must still prove its viability in real-world applications.
Regulatory hurdles also present obstacles. Nuclear projects face extensive approval processes, specialized labor requirements, and public scrutiny. The company must navigate complex licensing procedures while maintaining safety standards and managing public perception of nuclear technology.
Financial considerations add another layer of complexity. While SMRs promise lower construction costs than traditional nuclear plants, they still require substantial upfront investment. The success of Rolls-Royce's strategy depends on successfully delivering projects on time and within budget - historically challenging achievements in the nuclear sector.
Rolls-Royce faces competition from other SMR developers, including NuScale, GE Hitachi, and X-energy in the United States. However, the company's established nuclear submarine expertise and existing government relationships provide competitive advantages. The UK's support for domestic nuclear technology development also creates favorable conditions for Rolls-Royce's expansion.
The global implications extend beyond individual company success. Countries developing robust AI infrastructure powered by clean energy sources will likely gain competitive advantages in the digital economy. Rolls-Royce's vision aligns with broader national strategies to maintain technological leadership while meeting climate commitments.
Financial markets have responded positively to Rolls-Royce's transformation and nuclear ambitions. The company's share price recovery represents one of the most dramatic corporate turnarounds in recent UK market history. Analysts project continued growth potential, with some forecasting share prices could reach 2,389 pence by 2030 - representing additional gains of over 100% from current levels.
The SMR pipeline globally has grown by 42% in the first quarter of 2025 alone, reaching 47 gigawatts of planned capacity. Data centers now account for 39% of this pipeline, reflecting the growing convergence between nuclear technology and digital infrastructure. Investment in SMR development has reached approximately £360 billion globally, demonstrating substantial capital commitment to the technology.
Erginbilgic's confidence in Rolls-Royce's nuclear-powered AI strategy reflects broader industry trends toward sustainable computing infrastructure. As artificial intelligence applications continue expanding across industries, the demand for reliable, carbon-free power will only intensify. Companies that successfully bridge nuclear technology and digital infrastructure may capture disproportionate value in this emerging market.
The success of Rolls-Royce's ambitious vision will ultimately depend on execution. The company must demonstrate that SMRs can deliver promised benefits while maintaining safety standards and economic viability. If successful, the strategy could indeed position Rolls-Royce as the UK's most valuable company while establishing a new paradigm for powering the AI revolution.
Whether Rolls-Royce achieves its goal of becoming the UK's largest company remains to be seen. However, the convergence of nuclear technology and artificial intelligence represents a compelling investment thesis that could reshape both industries. As the world grapples with growing energy demands from digital technologies, companies like Rolls-Royce that can provide clean, reliable power solutions may find themselves at the center of the next economic transformation.