Is investing in Rolls-Royce shares buying into the UK’s first £1trn company?

Rolls-Royce (LSE: RR.) shares have enjoyed success after success in recent years. The share price has followed along with it – up over 20 times in value since late 2022. The surge has made the firm one of the largest stocks on the FTSE 100 with a market cap of £125bn (as I write). But it’s not just the past that looks promising — some are claiming that the engineering company could go on to become the UK’s first £1trn company.

Could Rolls-Royce pull it off? Will the share price rise another eight times in value to reach the trillion mark? Does the Footsie’s largest manufacturer still have that much growth left in the tank? Well, here’s one reason to think the answers to these questions might be yes…

Biggest opportunity?

The catalyst I am referring to is the company’s line of SMRs (small modular reactors). As a quick refresher, these SMRs are like small, cheap, and easily deployable nuclear power stations. They provide clean, on-demand energy with the important caveat that they sidestep many of the cost and delay problems associated with the building of other modern nuclear power plants.

Sounds like just what the country (and world!) needs, doesn’t it?

CEO Tufan Erginbilgiç thinks so. He has called SMRs “the single biggest opportunity for the UK for economic growth”. He also said the world will need 400 of them by 2050.

The need for energy might only increase as a result of artificial intelligence, too. The big AI firms have already been looking at ways to generate more energy with this new nuclear technology one of the prime candidates.

Downsides?

Are there are downsides here? Yes – this is not a technology that is proven to work at scale. The idea is to use the kind of nuclear reactor that Royal Naval submarines use to generate power underwater (Rolls-Royce build those, by the way). But, at the moment, there are only two SMRs in use, in Russia and China, and neither was a Rolls-Royce creation.

With all that said, the last few months have looked positive with a deal inked for three SMRs in Sweden and a contract expansion for two more locations in Czechia. This is all coming on the back of Rolls-Royce being selected by Great British Energy for a similar proposal, the first aiming to be built on Anglesey in the next few years.

Erginbilgiç has been keen to stress Rolls-Royce’s experience with related technology. He said: “There is no private company in the world with the nuclear capability we have. If we are not the market leader globally, we did something wrong.”

Overall? It’s impossible to say whether SMRs will be a damp squib or the catalyst that drives Rolls-Royce to a £1trn market cap. Given the company’s track record on engineering projects, I’d say it has a fair chance. Personally, I think the stock is worth considering.

Should you invest £5,000 in Rolls-Royce Plc right now?

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John Fieldsend owns shares in Rolls-Royce.