Rolls-Royce has been one of the FTSE 100’s most remarkable turnaround stories since CEO Tufan Erginbilgiç took the helm at the engineering giant.
The company’s shares returned an extraordinary 221.6% in 2023, followed by 89.7% in 2024, and a further 104.1% in 2025, compounding enormous gains for long-term investors.
In 2026 alone, the stock has climbed another 32%, meaning those who held throughout have seen their investment grow by a staggering cumulative amount.
Erginbilgiç has made no secret of his ambition, stating that Rolls-Royce has the potential to become the UK’s most valuable listed company, driven by the artificial intelligence revolution.
The connection between an engine maker and the AI boom may not be immediately obvious, but the company’s Power Systems division is already capturing surging demand from data centres.
These facilities are struggling to connect to the national grid fast enough, meaning Rolls-Royce gas generators are increasingly deployed as a primary power source rather than backup systems.
This distinction matters significantly for revenues, as engines used as a primary power source generate considerably more aftermarket income over time than those sitting idle in reserve.
By 2028, Rolls-Royce expects to have a more powerful engine available that specifically targets the data centre market, with the commercial opportunity stretching well into the 2030s.
The company’s small modular reactors, or SMRs, represent a second major link to the AI-driven energy theme, with each mini nuclear station capable of powering one million homes for at least 60 years.
Cloud computing giants including Microsoft, Google, and Amazon have already begun signing deals with SMR providers in the United States, with first deployments expected around 2030.
Rolls-Royce’s SMR and Power Systems teams are now presenting jointly when meeting with US hyperscalers, raising the prospect of major deals to power UK data centres in future.
The top five hyperscalers are on track to spend $1.3 trillion next year combined, with both the data centre and defence markets continuing to expand rapidly.
To claim the title of the UK’s largest listed company by market capitalisation, Rolls-Royce shares would need to more than double from current levels to around £32, assuming rival valuations remain static.
Since valuations across the market will continue to move, analysts suggest the stock may need to surpass £40 per share to realistically take the top spot from current leaders.
However, significant obstacles remain, including the risk of cost overruns and regulatory delays in the SMR programme, an area where the UK has a well-documented track record of setbacks.
Companies such as HSBC and AstraZeneca are also expected to grow their market capitalisations substantially, making the race for the top position increasingly competitive over the coming decade.
Crucially, Rolls-Royce does not depend solely on AI tailwinds to deliver growth, with its core civil aerospace business supplemented by long-term opportunities in defence and the broader green energy transition.
The stock’s elevated starting valuation means flawless execution will be required to justify further significant re-rating, suggesting investors may find better entry points on any meaningful dip.