Nokia’s Two-Speed Reality: Record AI Orders Clash With a Cash Squeeze That Won’t Let Up

Nokia shares surge 8.78% but remain 46% below highs, as €2.8B AI orders clash with negative cash flow and memory chip shortages lasting until 2027.

The numbers coming out of Nokia these days tell two radically different stories — and investors are caught in the crossfire. On Thursday, the stock jumped 8.78% to €8.01, a sharp rebound that briefly interrupted a brutal stretch. But that single-day pop masks a deeper tension: a company sitting on a pile of AI-driven orders worth €2.8 billion, yet bleeding cash and wrestling with supply constraints that its own CEO says could stretch into 2027.

The rally offered a moment of relief, but it didn’t erase the damage. Nokia shares now trade roughly 46% below their 52-week high of €14.97, a peak reached as recently as early June. Over the past 30 days alone, the stock has shed about 31% of its value. The 14-day relative strength index, which stood at 34.5 after Thursday’s bounce, had fallen as low as 26.1 earlier in the week — deep in oversold territory, a zone that historically precedes at least short-term recoveries.

A Strong Quarter That the Market Ignored

What makes this sell-off so striking is that it followed what looked like a solid quarterly report. Nokia’s second-quarter revenue rose 8% to €4.82 billion, while comparable operating profit climbed 18% to €434 million. The operating margin improved to 9%. The standout performer was the AI and cloud segment, where revenue more than doubled to €446 million, now accounting for 9.3% of total sales. The company also secured €2.8 billion in AI-related orders.

Management even raised its full-year profit guidance for 2026 to a range of €2.1 billion to €2.6 billion, up from the previous €2.0 billion to €2.5 billion target.

None of that stopped the stock from tumbling. The market’s focus landed squarely on the warning signs buried in the same report. CEO Justin Hotard told Bloomberg that memory chip shortages represent the single biggest bottleneck across the entire industry, and he expects the constraint to persist until 2027. That kind of multi-year headwind tends to compress valuation multiples, regardless of how strong the order book looks.

The message was reinforced by rival Ericsson, whose shares plunged nearly 12% on July 14 after the Swedish company cited the same memory chip cost inflation. The entire telecom equipment sector was dragged lower.

The Cash Flow Problem That Won’t Go Away

For all the excitement around AI orders, the balance sheet tells a more sobering story. Nokia reported negative free cash flow of €732 million in the second quarter. Working capital consumed roughly €1.15 billion during the period, with €370 million of that tied up in inventory alone. For the first half of the year, free cash flow stood at minus €104 million — a stark reversal from the €809 million surplus recorded in the same period last year.

Add to that restructuring costs of €800 million planned for 2026, with expected cash outflows between €700 million and €800 million. The company maintains its full-year cash flow target, but that puts enormous pressure on the second half to prove that the record AI order backlog can actually convert into cash, rather than sitting as a number on a spreadsheet.

Nokia’s response to the chip crunch — the acquisition of an NXP Semiconductors fabrication facility in Arizona — makes strategic sense as a long-term hedge. But it does nothing to ease the immediate margin pressure, and it introduces integration risk into an already complex turnaround story.

Two Clocks, One Stock

Nokia is effectively running on two separate timepieces. One shows a business undergoing structural improvement, with AI and cloud revenue doubling and orders piling up faster than supply chains can process them. The other follows the daily mood swings of the semiconductor sector, headlines about memory prices, and the broader risk appetite of equity markets — factors over which Nokia has little control.

This disconnect explains the violent price swings. With annualized volatility exceeding 74% over 30 days, the stock behaves more like a chipmaker than a staid network equipment provider. The 103.65% gain over the past twelve months suggests the rally had run ahead of fundamentals. The current pullback, painful as it is, may represent not panic but a overdue recalibration.

Thursday’s bounce is unlikely to be the end of the story. The technical setup — oversold readings, a 50% drop from the peak, and a price well below all major moving averages — makes a short-term recovery plausible. But the underlying question remains whether Nokia can turn its AI order bonanza into actual cash, or whether the inventory pile and chip shortages will keep eating into margins. Until that question gets answered, the stock is likely to keep swinging between the promise of a super-cycle and the friction of a supply chain that can’t keep up.