Nvidia's backing keeps Nokia stock rallying

What happened: Nokia Corporation (NOK), once a leading mobile phone manufacturer, has pivoted to AI-era optical networking under CEO Pekka Lundmark. In 2021, Nokia acquired Infinera, becoming a vertically integrated supplier of optical networking chips. This move, backed by Nvidia, positions Nokia in the $154 billion AI photonics market. Nokia's AI business is growing 49% year over year, with a EUR 1 billion ($1.16 billion) backlog in optical networking equipment. Nokia's stock has rallied 110% YTD, trading at $16.85 as of June 2nd, with insiders buying shares.

Market impact: The AI infrastructure sector is benefiting from Nokia's transformation. Nokia's entry into AI photonics could alleviate the next bottleneck for AI data centers, as identified by Goldman Sachs. This shift is driving growth in the optical networking segment, which posted a 20% year-over-year increase in sales. Nokia's rally, coupled with insider buying, signals investor confidence in the company's reinvention.

What to watch next: Nokia's next earnings report, scheduled for July 28th, will provide insight into the company's progress in AI photonics and optical networking growth. Additionally, the rollout of 5G networks and further advancements in AI technology will determine Nokia's long-term success in its new market. Lastly, any strategic partnerships or acquisitions Nokia announces could further solidify its position in the AI infrastructure space.