Nvidia's USD 1 Billion Investment Sends Nokia Shares to Decade High
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Nokia's shares are anticipated to reach their highest level in nearly a decade after Nvidia's announced USD 1 billion investment for a 2.9% stake in the Finnish telecom equipment maker. This deal focuses on artificial intelligence and data centres, sparking optimism among investors.
The companies will collaborate on artificial intelligence networking solutions. They will also explore opportunities to integrate Nokia's data centre communications products into Nvidia's future AI infrastructure plans.
Capital expenditure on data centre infrastructure is projected to exceed USD 1.7 trillion by 2030, according to consulting firm McKinsey. This growth is largely driven by the expansion of artificial intelligence applications.
In the future report, Nvidia Chief Executive Officer Jensen Huang is quoted stating the deal is expected to help position the U.S. as "the centre of the next revolution in 6G." He thanked Nokia Chief Executive Officer Justin Hotard for aiding efforts to "bring telecommunication technology back to America."
Hotard described the agreement as "American technology delivering the base capability, which is the accelerated computing stack from Nvidia, now purpose-built for mobile." He expects new equipment to contribute to revenue from 2027, initially through 5G and then 6G deployment.
PP Foresight analyst Paolo Pescatore called the investment "a strong endorsement of Nokia's capabilities." He added that "next-generation networks, such as 6G, will play a significant role in enabling new AI-powered experiences."
According to the future report, Nokia's shares are expected to close up 20.86% following the announcement, which would be a high not seen since Jan. 2016. This significant rise highlights market confidence in Nokia's strategic direction.
Since joining Nokia in April, Hotard, who previously led Intel's data centres and AI group, has concentrated on expanding the company's data centre business. Discussions between Nvidia and Nokia about the technology had been ongoing since last year.
Hotard noted, "Jensen and I have been talking for a little bit and I love the pace at which Nvidia moves." He added, "It's a pace that I aspire for us to move at Nokia."
This non-exclusive partnership and investment will establish Nvidia as Nokia's second-largest shareholder. While Nokia utilises Marvell chips for many of its products, the collaboration marks a significant strategic shift.
Both Nokia and its Swedish competitor Ericsson develop equipment for connectivity within and between data centres. Both companies have been benefiting from the increasing adoption of artificial intelligence.
Danske Bank Credit Research analyst Mads Rosendal suggested that although Nvidia chips might be more expensive, the proposed partnership would be mutually beneficial. This is due to Nvidia's substantial share in the U.S. data centre market.
Separately, the two companies will also partner with T-Mobile U.S. to advance artificial intelligence radio technologies for 6G development. Trials for these technologies are set to commence from next year.
Nokia confirmed it would issue 166,389,351 new shares for Nvidia. The U.S. company will subscribe to these shares at USD 6.01 per share, formalising the investment.
Nvidia is investing USD 1 billion for a 2.9% stake in Nokia, focusing on artificial intelligence and data centres.
Nokia's shares surged 20.86%, reaching a level last observed in Jan. 2016, following the investment announcement.
The collaboration will integrate Nokia's data centre communication products into Nvidia's AI infrastructure and develop 6G technologies.
Source: REUTERS