Why Nokia Stock Sank 9.2% Today
Key Points
Nokia announced a major restructuring as part of its push into AI.
The company will now consist of two units: network infrastructure and mobile infrastructure.
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Shares of Nokia (NYSE: NOK) fell on Wednesday, finishing the day down 9.2%. The drop came as the S&P 500 and the Nasdaq Composite gained 0.3% and 0.5%, respectively.
Nokia, once known for its ubiquitous cellphones popular in the pre-smartphone era, is reinventing itself once again. Nokia announced on Wednesday that it will restructure into two units -- network infrastructure and mobile infrastructure -- as part of its effort to better serve the artificial intelligence (AI) "supercycle," as the company calls it.
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Nokia is all in on AI
Nokia's restructuring announced comes just weeks after the company said AI giant Nvidia would invest $1 billion in exchange for a roughly 3% stake in the company. The two will partner to integrate AI into mobile networking and help transform networking within AI data centers.
/Image source: Getty Images.
While today's restructure announcement is a concrete step in Nokia's new AI-focused strategy, it comes at a time when investors are increasingly wary of an AI infrastructure overbuild.
While the current data center build-out looks unsustainable to me, I do think there is upside here. Leveraging AI to boost efficiency and better manage mobile networks is a useful application of the technology, with tangible value.
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Johnny Rice 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.
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