Rolls-Royce stock is quietly turning into an AI play

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Over the course of Rolls-Royce (LSE: RR.) stock surging 1,595% in the last few years, much has been made of two of its three divisions. Civil Aerospace, which makes engines for civilian aeroplanes, has been thriving in part thanks to the rebound of passenger flights since the pandemic. Defence, which includes engines for military aircraft and reactors for submarines, has been boosted by huge increases to government defence spending.

But there’s a third division that gets less attention than those two. And it’s a segment that has been signing contracts with Nvidia and playing a vital role in the artificial intelligence revolution. It also means Rolls-Royce could end up being the FTSE 100‘s AI superstar.

Data centres

The third division is called Power Systems and encompasses a number of types of power generation like generators or engines. Why is it playing a part in artificial intelligence? Well, it all comes down to data centres.

The data centres used to train artificial intelligence can’t just be switched on or off. Each one contains thousands of GPUs working on some of the most complex projects known to humanity. The power goes out? A disaster. That’s not tenable for pioneering AI giants like Nvidia. Hence, reliable power is very, very important.

Enter Rolls-Royce. Using its critical systems like mtu Series 4000 gas gensets (a type of gas engine) or Series 4000 diesel generators, the company can provide data centres with crucial backup power generation.

These systems can be put into action in a matter of seconds. They can even keep whole centres running for days in an emergency.

The knock-on effect is that Power Systems is the firm’s fastest-growing division. Earnings rose 89% year on year for the first half of 2025. With studies predicting power generation from data centres to climb twofold by 2030, this might be one of the best ‘pick and shovel’ plays for artificial intelligence.

Throw in the mooted deployment of Rolls-Royce SMRs (mini nuclear power stations) in these data centres. That could be another big revenue stream when they come on-line in the 2030s.

Worth it?

That’s a lot of bullish talk. So what’s the bear case here? For one, naysayers might be right about artificial intelligence being in a bubble. What if the ChatGPTs of the world never lead to serious increases in productivity? What if the technology is as good as it ever gets? As an ‘AI play’ Rolls-Royce could suffer too.

From another angle, Power Systems isn’t the core of the business. It’s still smaller in sales than both Civil Aerospace and Defence. Artificial intelligence only has so much impact on what’s now a £101bn market cap company.

Lastly, Rolls-Royce is looking very pricey on valuation terms. A forward price-to-earnings ratio of 40 is higher than many of the exciting pure AI plays. Heck, it’s higher than Nvidia! Investors are paying a lot for each pound of profit.

With all that being said, I think artificial intelligence is another feather in an already very impressive Rolls-Royce cap. I think the stock is worth considering.

The post Rolls-Royce stock is quietly turning into an AI play appeared first on The Motley Fool UK.

More reading

• Are Rolls-Royce shares still a once-in-a-decade opportunity?
• The paradoxical nature of Rolls-Royce shares in 2026
• The good, the bad, and the unknown for Rolls-Royce shares
• Down 7.5% since the peak, has the Rolls-Royce share price collapse started?
• Get ready for a Rolls-Royce share price crash

John Fieldsend has positions in Rolls-Royce Plc. The Motley Fool UK has recommended Nvidia and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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