The Smartest Growth Stock to Buy With $1,000 Right Now

If the idea of stepping into any new growth stock at this time makes you a little bit nervous, you're not alone. The overall market is undeniably expensive right now and seemingly due for a correction.

Dig deeper, though, and you'll find that only a small handful of the market's most popular technology stocks are currently overpriced. Most everything else is fairly valued, if not underpriced, because their underlying companies are currently underestimated.

One of these names stands out among the rest right now: Nokia (NYSE: NOK). If you have an extra $1,000 you're ready to put to work for a while, it's a compelling prospect.

Image source: Getty Images.

Yes, that Nokia

That's not a misprint. The Finnish telecom technology company is not exactly known for being a growth investment, but it has recently become a top prospect.

Credit its recent strategic shift, mostly. Although it's not abandoning its existing mobile infrastructure and physical networking businesses, artificial intelligence (AI) chipmaker Nvidia made a decision in late October that arguably changed everything.

It tapped Nokia to help it develop an AI-powered platform capable of handling 6G mobile connectivity -- one generation beyond the current 5G standard. The new AI-RAN (for AI-enabled radio access network) is necessary to handle the ever-growing need for faster and higher-capacity connections that the continued growth of AI, edge computing, and the Internet of Things is driving.

This technology will also largely be software-powered rather than hardware-dependent, meaning it can be upgraded and improved by uploading new code rather than requiring a physical replacement of boards, chips, or entire systems. This ultimately lowers operating costs.

Nvidia even put the icing on the cake with a $1 billion equity investment in Nokia.

A technologically driven tailwind is rising

For all we know about the partnership, there's at least as much we don't know. Chief among these unknowns is why it matters so much. Sixth-generation mobile connectivity is going to be better, and will need to be in order to accommodate all the new information that AI requires and then creates. But what does that mean in practical terms?

The key isn't so much the speed at which it will perform, or the capacity this next-generation connectivity inherently has. It's the how: With radio frequencies and bandwidth already near the limits of how much digital data they can process, the next generation of connectivity tech's big improvement will be how it's managed.

Traditional software can't do it. It must be done with AI. As Nvidia CEO Jensen Huang said in March (well before the company's partnership with Nokia was solidified), "There is no question in my mind that accelerated computing infused with AI will do a far better job adapting radio signals and massive MIMOs [multiple-input, multiple-output networks] to changing environments and traffic conditions."

And he's not alone in his understanding of what this next-gen solution requires. Adrian Baschnonga -- global technology, media and entertainment, and telecommunications analyst at Ernst & Young -- said, "Embedding AI in the network will ultimately reduce the complexity and cost of managing infrastructure for operators, while improving sustainability and security."

The end result will be low-latency and power-efficient networks better equipped to support truly smart factories (and smart cities) while managing fleets of autonomous automobiles, robotic surgery, and virtual reality -- and more.

And it should all be surprisingly cost-effective. That's why Straits Research expects the worldwide 6G market to grow by more than 32% per year through 2033.

The time is now

The market connected these dots as best it could in anticipation of the late-October news, catapulting Nokia's stock to a multiyear peak of $8.19 after it became official.

As is so often the case, though, investors ultimately decided to buy the rumor and sell the news. Shares peaked that very same day before giving up more than 20% of that high since then. A lack of clear understanding of what 6G connectivity can do or when Nokia will actually monetize its work with Nvidia helped deflate the sudden swell of bullishness.

That's precisely what long-term growth investors should want to happen, though: Let the knee-jerk euphoria run its course, and then ease in after shares of the target company slide back to a more levelheaded price. That's what happened here.

Although Nokia is still relatively expensive compared to most other stocks, a little over 30 times next year's projected earnings of $0.39 per share is a fair price to pay for a stake in a company that's at least consistently profitable, even if it's not growing like crazy just yet.

The key is simply remaining patient. It could take years for the Nvidia partnership -- and all the ones that will follow, specifically because of this high-profile arrangement -- to really bear fruit. The forward-looking dividend yield in the ballpark of 2.5% makes it much easier to own Nokia while you wait for the bigger payoff.

James Brumley 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.