Nokia (NOK) Stock Drops 5% After Nvidia Partnership Rally

TLDR

• Nokia shares fell 5% in Helsinki after a 40% two-day rally sparked by the Nvidia partnership announcement
• Nvidia is buying a 2.9% stake in Nokia for $1 billion to develop AI-powered radio networks and data center technology
• Analysts at Kepler Cheuvreux caution the stock rally has been “excessive” given uncertain revenue timelines
• Nokia CEO expects revenue from the deal starting in 2027 with 5G deployment before moving to 6G
• The investment makes Nvidia Nokia’s second-largest shareholder in a nonexclusive partnership

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Nokia stock pulled back on Thursday after a massive two-day rally. Shares dropped 5% in Helsinki trading following a surge of more than 40% tied to a new Nvidia deal.

Nokia Oyj, NOK

The Finnish telecom company announced a partnership with Nvidia focused on AI-powered radio access networks. Nvidia will invest $1 billion for approximately 2.9% of Nokia’s outstanding shares.

The deal initially sent Nokia stock to its highest level in nearly a decade. Shares closed up 20.86% on Tuesday, reaching prices not seen since January 2016.

Nvidia will pay $6.01 per share for 166,389,351 new Nokia shares. This makes Nvidia the second-largest shareholder in the company.

What the Nokia-Nvidia Deal Includes

The partnership centers on AI networking solutions for telecommunications infrastructure. Nokia will work to integrate its data center communications products into Nvidia’s future AI infrastructure plans.

Nvidia CEO Jensen Huang called the deal a step toward making the U.S. the center of 6G technology development. He thanked Nokia for helping bring telecommunications technology back to American companies.

Nokia CEO Justin Hotard expects commercial deployment to begin with 5G technology. Revenue from the new equipment should start flowing in 2027 before expanding to 6G networks.

Hotard joined Nokia in April from Intel’s data centers and AI group. Since taking over, he’s pushed to expand Nokia’s data center business operations.

Nvidia’s AI Aerial platform will serve as the foundation for an AI-native wireless stack for 6G. The project includes 5G RAN software from ODC, network functions from Cisco, and 6G applications from MITRE and Booz Allen.

Why Analysts Are Cautious

Kepler Cheuvreux analysts warned investors about getting too excited. The firm said the partnership “looks promising at first sight” but raised concerns about execution.

Medium-term revenue potential remains unclear, according to the analysts. The RAN market outlook for the next decade is weak. New competitive threats could emerge, potentially from Nvidia itself.

Tangible benefits from the collaboration may take years to materialize. Success depends on how well Nokia can integrate Nvidia’s technology into commercial network solutions.

McKinsey estimates capital expenditure on data center infrastructure will exceed $1.7 trillion by 2030. Most of this growth comes from AI expansion.

Nokia and Nvidia will also partner with T-Mobile U.S. to develop AI radio technologies. Trials for 6G development start next year.

The partnership is nonexclusive. Nokia currently uses Marvell chips for many products and competes with Swedish rival Ericsson in the data center connectivity space.

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