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NVIDIA plans to spend $1 billion to acquire a 2.9% ownership stake in Nokia at a share price of $6.01, making it the company’s second-largest shareholder. The two organisations will collaborate on AI network solutions and AI radio technology for 6G, as well as other related fields. Analysts indicate that “future networks such as 6G will be vital in enhancing new AI experiences.” Following the announcement, Nokia’s share price surged more than 20%, reaching a nearly decade-high.
Nokia announced on Tuesday that NVIDIA will purchase 166.4 million new shares of Nokia at $6.01 each. This will result in a $1 billion investment, which equates to a 2.9% ownership stake in the Finnish firm. This agreement will position NVIDIA as the second-largest stakeholder in Nokia.
The two companies will collaborate to develop AI network solutions and explore the potential of integrating Nokia’s data centre switching and optical technology into NVIDIA’s forthcoming AI infrastructure design. Also, their partnership will focus on the development of next-generation 6G technology, indicating that the fusion of AI and communications will continue to advance.
Following the announcement, the capital market swiftly responded favorably. Nokia’s share price surged more than 20% at Tuesday’s market close, reaching its highest level since January 2016. Simultaneously, NVIDIA’s share price rose.
NVIDIA CEO Jensen Huang stated that this partnership will contribute to “establishing the United States as the hub of the upcoming 6G revolution.”
Focusing on 6G, and Integration of AI and Telecommunications
A notable aspect of this partnership is the collaborative design for the upcoming mobile communication technology “6G.” Jensen Huang directly associated this partnership with the United States’ leading role in the 6G sector.
Nokia’s CEO, Justin Hotard, mentioned in a Reuters interview that the new investment is projected to begin generating revenue in 2027. It will start with the early commercial rollout of 5G, followed by the progression to 6G. Furthermore, Nokia and NVIDIA revealed their partnership with T-Mobile US to collaboratively create AI radio technology for 6G, with associated trials planned to commence next year.
Analyst Paolo Pescatore of PP Foresight considers this agreement a “robust endorsement” of Nokia’s skills, noting that “next-generation networks such as 6G will be crucial in facilitating new AI experiences.”
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Network Infrastructure: The Emerging Arena for AI Rivalry
NVIDIA’s investment underscores a growing trend: in the AI competition, the significance of networks equals that of computing power. As AI participants strive to transfer data more quickly within and beyond chip clusters, the demand for connectivity solutions is increasing.
Jensen Huang specifically highlighted during the earnings call that “the network is evidently crucial in the AI factory.” He thinks that the enhancements in performance from selecting the appropriate network can potentially “render the network itself costless.” Nokia’s latest financial report supported this trend, as its network infrastructure equipment sales increased due to heightened demand from AI and data centre clients in North America.
Image source: CNBC
According to consulting company McKinsey, worldwide investments in data centre infrastructure are projected to surpass $1.7 trillion by 2030, primarily driven by the growth of AI. NVIDIA seeks to maintain its leadership in AI infrastructure, spanning from chip to network levels, via its partnership with Nokia.
NVIDIA Set to Become Nokia’s Second-Biggest Shareholder
Following this recent investment, NVIDIA will become Nokia’s second-largest shareholder. However, the partnership remains non-exclusive. Included in the deal is an agreement that Nokia can continue to use its current suppliers, such as Marvel, for chips.
Mads Rosendal, a credit research analyst at Danske Bank, noted that while NVIDIA’s chips may be pricier, given NVIDIA’s substantial presence in the U.S. data centre market, this collaboration serves the interests of both parties.
Nokia will use this investment to support its “progress in reliable connectivity during the AI supercycle” and expedite the creation of 5G and 6G ran software on NVIDIA’s platform.
This investment further extends NVIDIA’s recent pattern of large-scale investments. The company recently pledged to invest $5 billion in Intel and plans to invest up to $100 billion in OpenAI over the next few years.
