Nokia’s strategy for growth is unfolding during a decline in investments for 5G technology.
Earlier this year, in an effort to capitalize on the AI surge, the company purchased the U.S. optical networking company Infinera.
This purchase has boosted its revenues and was complemented by a $1 billion equity investment from Nvidia, the semiconductor manufacturer, which acquired a 2.9% share in the Finnish company.
During the firm’s capital markets day in New York, CEO Justin Hotard emphasized the rising interest from major cloud service providers. “The largest hyperscalers are now allocating more funds each quarter than what the largest telecom companies invest over an entire year,” he remarked, noting that nine of the ten top cloud providers have adopted Nokia’s technology.
The firm also revealed its intentions to create a new defense incubation division to provide secure connections for Western nations, with the goal of cutting overall operating costs to 150 million euros by 2028, down from 350 million euros.
However, this strategic announcement negatively impacted investor confidence, leading to a drop in Nokia’s stock by as much as 6%, making it one of the poorest performers on the pan-European Stoxx 600 index, although it remains up 25% for the year.
“Investor expectations were elevated following a significant rise in share value,” noted Atte Riikola, an analyst with Inderes.
PP Foresight analyst Paolo Pescatore commented that the new plan does not represent a significant shift from its present strategy, but also highlighted important worries regarding AI, considering the considerable investment required and the unpredictable returns.