Why Nokia Stock Surged Today

Shares of Nokia (NYSE: NOK) soared by 23% on Tuesday after the telecom equipment provider announced a billion-dollar partnership with artificial intelligence (AI) titan Nvidia (NASDAQ: NVDA).

Image source: Getty Images.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Entering the AI arena

As part of the deal, Nvidia plans to make a $1 billion investment in Nokia in exchange for a 2.9% stake in the Finnish networking pioneer. To facilitate the transaction, Nokia will issue 166,389,351 new shares, which Nvidia will purchase for $6.01 per share.

Nokia intends to use the cash to accelerate its efforts to supply advanced connectivity solutions to the fast-growing AI industry. As part of this growth strategy, Nokia will make its 5G and forthcoming 6G software capable of running on Nvidia's chips and related equipment. The two companies will also work together to integrate Nokia's switching and optical technologies into Nvidia's AI offerings.

AI is going mobile and coming to the edge

Nokia and Nvidia claim that fast and secure telecommunications tools are critical national infrastructure -- and they're right. AI-powered applications are increasingly being delivered via smartphones and other mobile devices. The two tech leaders want to play a central role in enabling these AI services by ensuring networks can handle the coming surge in mobile traffic.

At the same time, advances in edge computing are moving AI from data centers to distributed devices like smart appliances, autonomous vehicles, and drones. Nokia CEO Justin Hotard wants to support this explosion in AI-native edge devices and "put an AI data center into everyone's pocket."

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.