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Two days ago, Prime Minister Kier Starmer announced plans to “mainline“artificial intelligence (ai)”in the veins” of the United Kingdom to boost productivity in public services and drive future economic growth. If we look at the details, I think two FTSE stocks could benefit from this ambition to make the UK a country.”ai superpowers“.
FTSE 250
The first part is Kainos Group (LSE: KNOS). This is a size medium. FTSE 250 technology company that helps public and private sector organizations digitally transform. Specializes in product deployment working daythe cloud-based platform for human resources and finance.
Kainos stock has performed well over the long term, but more recently it has fallen on hard times. It is now trading at 768 pence, down 62% from the price of 2,052 pence in November 2021.
So how will Kainos benefit from the government's ai proposals? Well, the IT provider has a strong track record of working with public sector clients, including the NHS and the Department for Transport. That is why it is already a trusted partner.
Additionally, Kainos is already leveraging ai to benefit its customers. In the six months to September, it won almost 40 ai and data projects across the public, healthcare and commercial sectors, bringing the total so far to more than 140. I expect the number to rise much further in the future after they are announced the latest ai plans. .
Naturally, the company faces great competition to win contracts in this area, while public finances remain stretched to the limit. And it is struggling to grow its revenue right now in a challenging business environment.
These issues are worth considering, as the benefits of ai will not happen overnight. However, in the long term, Kainos appears incredibly well positioned to benefit from these ai-powered public sector productivity plans.
Given that the stock is trading at a fairly reasonable 19 times FY25 earnings (ending March) and yielding 3.7%, I think it's worth considering.
FTSE 100
In addition to being powerful, ai is also very power hungry. In fact, Big tech energy consumption is currently surpassing entire countries!
To further his plans, Starmer also announced the establishment of an ai Energy Council to explore innovative energy solutions, including small modular reactors (SMR). These are factory-built mini nuclear reactors that offer scalable, low-carbon energy.
One of the pioneers in the development of SMR is Rolls-Royce (LSE: RR). He FTSE 100 The company has a dedicated subsidiary and this company remains in pole position to win a competition to implement SMR across the UK.
In September, the Czech Republic selected Rolls-Royce SMR as its preferred minijet supplier. said this “reinforces Rolls-Royce SMR's position as the leader in European SMR technology”.
Unfortunately, it won't be until the early 2030s when this technology begins to be widely deployed. And despite the outcry it would cause in the UK, Rolls-Royce may not be chosen this year as one of two winners from four contenders.
Meanwhile, FTSE 100 shares are not cheap after rising 86% in a year. It's trading at 26.5 times this year's expected earnings, which is quite expensive.
However, the long-term opportunity seems enormous. According to estimates, the global SMR market could reach $295 billion within 20 years. This will be driven by European nations aiming to achieve net zero targets and increasing energy demand from ai data centers.
