As the Iran war rattles the FTSE 100, weapons maker BAE Systems looks like the obvious beneficiary. Its shares have surged 20% in the last month. Yet it’s only the second-best performer on the blue-chip index.
Energy giants are also thriving. With oil pushing towards $100 a barrel and some analysts talking about $150 or even $200, BP and Shell are up 15% over the month. They rank third and fourth among the top performers.
RELX shares are racing back
Yet all three trail the month’s real winner. Step forward RELX (LSE: REL), the data and analytics specialist whose shares have jumped 26% in just four weeks. It’s an eye-catching rally for a company that only recently sat at the centre of a fierce debate about artificial intelligence. But can its surge last?
RELX has been a super FTSE 100 success story. The group supplies specialist data, analytics, and research tools to industries including law, insurance, finance, and science. Its databases and software help professionals analyse risk, manage compliance, and carry out complex research.
That steady flow of subscription revenue helped turn RELX into a top 10 London-listed company, with a market value of roughly £65bn at its peak. The shares delivered a blend of reliable growth and rising income.
But when ChatGPT burst onto the scene in late 2023, investors feared powerful generative AI tools might replace expensive specialist databases. If chatbots could instantly answer complex questions, would companies still pay for RELX’s services?
The concern faded after management argued that its vast datasets would remain valuable and new AI tools could make them even more powerful. But when US company Anthropic released an AI-powered productivity tool for companies’ in-house legal teams in February, investors panicked again. Despite the recent jump, they’re still down 30% over 12 months.
Strong numbers steady nerves
Confidence strengthened after RELX reported solid results on 12 February. Underlying operating profit rose 9% to £3.3bn. Management reported strong demand across most divisions. It also stressed that it’s building more AI functionality into its platforms while keeping cost growth below revenue growth. A £2.25bn share buyback across 2026 helped fuel the recovery.
Despite the rally, the shares remain cheaper than they were. The price-to-earnings ratio now sits around 20. Not long ago it traded above 30. The dividend yield has edged up to 2.6%.
AI is evolving rapidly and it’s impossible to know exactly how big a threat it poses. RELX believes its data depth and industry relationships give it strong protection. Fewer hallucinations too, I would imagine.
The RELX rally appears to have eased, so bargain seekers may have missed the point of maximum opportunity. I still think it’s worth considering for those who believe AI will struggle to replicate RELX’s specialist data. But I also fear AI will continue to cast a shadow, and we may see further panics, as new software is released.
RELX remains an impressive business, but I’m wary. Plenty of other beaten-down companies are trading at tempting valuations in today’s volatile market. I’ll focus my efforts on them instead.
