Nokia's Great Rebalancing: Exiting the Middle Kingdom While Betting Heavily on AI

Nokia exits China, cuts 1,600 jobs, and invests in AI infrastructure with Nvidia backing, aiming for growth in 6G and defense tech.

The Finnish telecom equipment maker is executing one of the most consequential strategic pivots in its recent history, simultaneously unwinding its Chinese footprint while doubling down on artificial intelligence infrastructure. The contrast could hardly be starker: as Nokia prepares to shutter its Hangzhou R&D facility for radio technology by the end of 2026 — eliminating roughly 1,600 jobs — its AI & Cloud segment just booked €2.8 billion in second-quarter orders, with revenue in that division more than doubling.

The Price of Exit

Nokia's departure from China carries a substantial tab. The company expects total restructuring costs of €800 million in 2026, with €350 million earmarked for integrating its Chinese joint venture — a process slated for completion within two years. An additional €200 million will fund supplementary programs concentrated primarily in Europe. The secondary article frames the integration costs in dollar terms, pegging one-time expenses between $410 million and $465 million, though the savings story is equally compelling: the integration is projected to generate more than $400 million in annual savings by the end of 2026.

The rationale for the retreat becomes clear when examining the numbers. Nokia's Chinese market share has dwindled to roughly 3 percent, while revenue from the region collapsed from $2.5 billion in 2018 to just $1.06 billion in 2025. The freed-up capital and personnel resources are being redirected toward 6G technology development — a strategic reallocation that investors appear to be endorsing.

A Nordic Alliance for Security

Wednesday brought news that Nokia has joined the "Nordic Compass" initiative alongside regional industrial heavyweights Ericsson and Saab. The alliance, cemented during a high-level Helsinki gathering that included Finnish President Alexander Stubb, aims to bolster Northern Europe's competitiveness in defense and advanced technology. The collaboration seeks to build Europe's technological foundation for security while exploiting synergies between civilian and military communications equipment.

This security-focused positioning dovetails with Nokia's expanding AI ambitions. The company is serving as strategic partner for the Ooredoo Group's roughly $800 million investment in the Zankore AI infrastructure platform, which will deliver one gigawatt of capacity across "Nvidia DSX AI Factories." The project is slated to launch in Indonesia, signaling Nokia's ambition to transcend its traditional mobile networking business and compete as an equipment provider for hyperscale data centers.

The Nvidia Connection

Nokia's alignment with Nvidia extends beyond individual projects. An August filing revealed that Nvidia holds a $1.0 billion stake in Nokia — approximately 2.9 percent of the Finnish company — embedded within a broader investment strategy targeting AI infrastructure. For many market observers, such a substantial commitment from the chip giant validates Nokia's relevance in AI data centers and edge networking.

In July, Nokia unveiled what it describes as the first commercial AI-RAN platform, built on Nvidia's Aerial software and compute stack. The platform aims to extract greater capacity from existing 4G and 5G radio cells using artificial intelligence while laying groundwork for 6G.

Regulatory Tailwinds and Industry Recognition

External factors are also working in Nokia's favor. Reports indicate the US Federal Communications Commission is developing a ban on new optical transceivers of Chinese origin — a move that would redirect attention toward non-Chinese suppliers, a category that includes Nokia.

On the competitive front, market research firm Omdia's "Market Landscape: Core Vendors" report ranked Nokia first in mobile core portfolio competitiveness for the second consecutive time, with the company rated as a leader across all seven categories examined — from cloud-native maturity and automation to AI and analytics capabilities.

Portfolio Pruning and Consumer Niche

Beyond the China exit, Nokia is streamlining its portfolio. The Fixed Wireless Access CPE and Enterprise Campus Edge divisions have been classified as discontinued operations. Nokia has already reached an agreement with Inseego for the CPE business, while a sale of Enterprise Campus Edge is considered highly probable.

The consumer brand, meanwhile, continues to exist in carefully curated niches. HMD Global unveiled the "Nokia 300 Charge" handset today, featuring a 3,700-mAh battery and reverse-charging capability. Additionally, the "HMD Touch AI" model is launching in Southeast Asia — a device with the classic design language of earlier Lumia smartphones but equipped with integrated AI functions for everyday use.

Market Response

The stock has been consolidating after a powerful run. Shares closed Wednesday at €8.95, roughly 40 percent below the 52-week high of €14.97 reached in June. The price remains comfortably above the 200-day moving average of €8.23, suggesting the broader uptrend stays intact despite recent softness. Year-to-date, the stock has gained 60 percent.

Investors are evidently rewarding the company's willingness to abandon the margin-squeezed China business in favor of defense technology and AI-driven network infrastructure. Yet the substantial discount to its recent peak serves as a reminder that the transformation remains a work in progress — one that carries execution risk even as the strategic direction becomes increasingly clear.