In a surprising move revealed Tuesday, Nvidia (NVDA +4.98%) announced it was taking a $1 billion investment stake in Nokia (NOK +22.84%). The news pushed Nokia stock up 22.8% in the day's trading and rocketed its market capitalization up to approximately $41.8 billion -- its highest level in well over a decade.
In addition to the investment deal, Nokia is teaming up to tailor its 5G and 6G technologies to run on Nvidia's processors. The two companies are also teaming up to create other network technologies to support artificial intelligence (AI) initiatives. Is Nokia stock poised for a sustained bullish run now that it has Nvidia in its corner?
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Nvidia flashes green flag for Nokia investors
A vote of confidence from Nvidia carries a lot of weight in the tech world -- and for good reason. The company's advanced graphics processing units (GPUs) are the top hardware for training and running AI models and applications.
The hardware leader has played a pioneering role in pushing the AI revolution forward, and it's scored incredible sales and earnings growth as customers have lined up to purchase its processors and secure a seat at the table for potentially transformative artificial intelligence trends. These dynamics have made Nvidia the world's most valuable company, and it sported a market capitalization of approximately $4.89 trillion at today's market close.
As the top player in the AI hardware market, Nvidia could emerge as a partner that helps drive big growth for Nokia and allow the smaller tech player to more easily branch into promising categories. The stock purchase raises some intriguing questions about what the AI giant sees in the former mobile hardware leader. Nvidia has had a fantastic track record with growth bets over the last half-decade, and it may have seen potential in Nokia's that's previously gone largely overlooked.
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On the other hand, there are also recent developments that suggest investors shouldn't get too comfortable with expectations that Nvidia's investment is sure to power long-term gains for Nokia. For example, companies such as SoundHound AI and Serve Robotics saw massive gains when it was announced that Nvidia had made investments in them -- only to get hit with big sell-offs when subsequent 13F filings showed that these investment stakes had been liquidated.
In the grand scheme of things, Nvidia's investment in Nokia is still relatively small. Alternatively, the partnership between the two companies looks far more significant because Nokia's 5G and 6G technologies could be useful to Internet of Things (IoT) and robotics initiatives from Nvidia and other companies.
While the rise of large language models has already had a substantial impact on the software side of the tech sector, real-world AI implementation to further robotics and IoT technologies still appears to be at an earlier growth phase. Nokia was already scoring some significant wins and showing promise with its 5G and next-generation network technologies, and the recent team-up with Nvidia signals that the stock could be worth a close look for risk-tolerant investors.
