Nvidia's $1 billion stake sends Nokia to decade high on AI hopes

By Supantha Mukherjee and Louise Rasmussen STOCKHOLM (Reuters) -Nvidia will pay $1 billion for a stake of 2.9% in Nokia as part of a deal focused on AI and data centers, the Finnish telecom equipment maker said on Tuesday as its shares hit their highest level in nearly a decade. Nokia said the companies will collaborate on artificial intelligence networking solutions and explore opportunities to include its data center communications products in Nvidia's future AI infrastructure plans. Capital expenditure on data center infrastructure is expected to exceed $1.7 trillion by 2030, consulting firm McKinsey estimates, largely because of the expansion of AI. Nvidia has a near-monopoly in supplying chips for data centers and has partnered with companies ranging from OpenAI to Microsoft. Nvidia CEO Jensen Huang said the deal would help make the U.S. the center of the next revolution in 6G. "Thank you for helping the United States bring telecommunication technology back to America," Huang said in a speech in Washington, addressing Nokia CEO Justin Hotard. "The key thing here is it's American technology delivering the base capability, which is the accelerated computing stack from Nvidia, now purpose-built for mobile," Hotard told Reuters in an interview. He expects the new equipment to start contributing to revenue from 2027 as it goes into commercial deployment, first with 5G, followed by 6G. "This is a strong endorsement of Nokia's capabilities," said PP Foresight analyst Paolo Pescatore, adding: "Next-generation networks, such as 6G, will play a significant role in enabling new AI-powered experiences." Nokia's shares closed up 20.86% after the deal announcement, a high last touched in late January 2016. NEW NOKIA CEO BETS ON AI GROWTH, DATA CENTER BUSINESS  Since joining Nokia in April, Hotard, who earlier led Intel's data centers and AI group, has focused on expanding its data center business. While Nvidia and Nokia have been talking about the technology since last year, Hotard sped up the discussions. "Jensen and I have been talking for a little bit and I love the pace at which Nvidia moves," Hotard said. "It's a pace that I aspire for us to move at Nokia." The nonexclusive partnership and the investment will make Nvidia the second-largest shareholder in Nokia. Nokia, which uses Marvell chips for many of its products, and its Swedish rival Ericsson both make equipment for connectivity inside data centers and between data centers and have been benefiting from increased AI use. While Nvidia chips are likely to be more expensive, said Mads Rosendal, analyst at Danske Bank Credit Research, the proposed partnership would be mutually beneficial, given Nvidia's large share in the U.S. data center market. Separately, the two companies will also partner with T-Mobile U.S. to develop AI radio technologies for developing 6G and start trials from next year, Nokia said.  Nokia said it will issue 166,389,351 new shares for Nvidia, which the U.S. company will subscribe to at $6.01 per share. (Reporting by Supantha Mukherjee and Johan Ahlander in Stockholm, Louise Rasmussen in Copenhagen and Gianluca Lo Nostro in Gdansk; Editing by Alexander Smith and Matthew Lewis)

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