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The Rolls-Royce Holdings (LSE: RR.) share price climbed to 1,130p at close Thursday (18 September). That’s a staggering 1,729% gain in the past five years.
If anyone says it might be a bit much for an aero engine maker, I think I agree. But this is about more than engines.
US/UK tech partnerships
Part of US President Donald Trump’s UK state visit was about high-tech investment. He and Prime Minister Keir Starmer signed what they called the Tech Prosperity Deal, which sets the grounds for £150bn worth of US investment in the UK.
About £90bn of that is due from private equity firm Blackstone over the next decade. Microsoft is down for £22bn over four years, with £5bn from Alphabet‘s Google in the next two.
We could see up to 60,000 Nvidia Grace Blackwell Ultra chips employed in the UK’s biggest AI supercomputer. And CEO Jensen Huang has said “I declare the UK will be an AI superpower“.
It’s about AI, quantum computing, massive computers, and data centres. Oh, and nuclear power. All tomorrow’s tech will need increasing amounts of energy, and the new generation of small modular reactors look perfect for the job.
Rolls in the driving seat
That, of course, is where Rolls-Royce comes in. And it’s what a lot of today’s investors see driving further share price gains. Rolls sees small modular reactors (SMRs) “providing a British solution to a global energy crisis“.
The company claims “Each Rolls-Royce SMR power station will produce enough stable, affordable and emission-free energy to power a million homes for at least 60 years – more than any other SMR“.
It also says it’s “up to eighteen months ahead of competitors in any European regulatory process and, with this first mover advantage, is in pole position to become a world leader in SMR technology“.
First mover advantage
If it all comes off, I do think today’s rush to fill every corner of our world with AI robots, supercomputers, and all the rest could help secure a nicely profitable future for Rolls shareholders. They might look back on the good old days when we could buy shares for less than £12.
But I also suspect this rose-tinted view of a utopian, AI-led, emission-free future might be underestimating the timescale. And perhaps overlooking some potential pitfalls.
For one, new technology pioneers don’t always become the big winners — ask the Wright Brothers about that.
And is it possible we’re in an AI bubble that could burst? Even OpenAI CEO Sam Altman has voiced fears that “someone is going to lose a phenomenal amount of money in AI“.
Disjoint?
I’m torn between the excitement of a new technological dawn, and a fear that investors might have piled in too much too soon.
Should optimistic growth investors with a long-term horizon consider buying Rolls-Royce shares now? Yes, I think so. But I also think they need to be prepared for the risk. Will I buy? No, because I’m getting too risk-averse in my old age.
But if a bubble should burst, and make the top companies like Rolls-Royce look dirt cheap… I’ll keep some investment pennies ready just in case.
