Is Nokia Poised to Outperform in the AI-Driven 6G Era?

The race to dominate the next-generation telecommunications landscape is heating up, and Nokia finds itself at a pivotal crossroads. With the global 6G market projected to grow at a staggering 35% compound annual growth rate over the next decade, the stakes for infrastructure providers have never been higher. Nokia's recent strategic moves-bolstered by a $4 billion U.S. investment in AI-ready networks and a landmark $1 billion partnership with NVIDIA-suggest a company determined to reclaim its position as a leader in the telecom renaissance. But can these initiatives translate into sustainable outperformance in a market crowded by Huawei's aggressive R&D spending and Ericsson's disciplined cost management?

Strategic Positioning: AI-Optimized Networks and Geopolitical Leverage

Nokia's $4 billion U.S. investment, announced in late 2025, is not merely a capital allocation-it is a calculated bet on the future of AI-driven connectivity. The company is channeling $3.5 billion into R&D for technologies spanning mobile, optical, and data center networking, with a specific focus on AI-optimized infrastructure. This aligns with the U.S. government's push to reassert leadership in telecommunications, a dynamic Nokia is leveraging to its advantage. The partnership with NVIDIA, which includes the deployment of the NVIDIA Arc Aerial RAN Computer, further cements Nokia's role in developing 6G-ready platforms. By integrating AI-native 5G-Advanced and 6G networks, Nokia is positioning itself as a key enabler of distributed edge AI inferencing-a critical capability for applications ranging from autonomous vehicles to smart cities.

However, strategic ambition alone is not enough. Nokia's reorganization into two business segments-network infrastructure (AI and data centers) and mobile infrastructure (core telecom)-signals a recognition of its operational weaknesses. The mobile networks segment, which has seen an 88% decline in operating profit to €12 million in 2025, remains a drag on overall performance. This structural shift aims to isolate high-growth areas from legacy challenges, but execution will be key.

Financial Realities: Profit Margins and Valuation Multiples

Nokia's financials tell a mixed story. While Q2 2025 revenue of $5.34 billion exceeded expectations, earnings per share (EPS) of $0.04 fell short of the $0.07 forecast. The company's price-to-earnings (P/E) ratio of 26.6 suggests investor optimism about its AI-driven growth potential, but this is tempered by a forward P/E of 17.85x, which is still higher than Ericsson's 12.15x according to financial data. Ericsson, meanwhile, has managed to maintain a 48% adjusted gross margin in 2025 according to market reports, a testament to its cost-disciplined approach and focus on high-margin markets like the U.S.

Huawei's financials, though less transparent, reveal a different challenge. The Chinese giant's 2025 R&D spend of $25.1 billion dwarfs Nokia and Ericsson's combined $10.83 billion, but geopolitical restrictions have eroded its international market share from 41% in 2019 to 29% in 2024 according to market analysis. This creates a paradox: Huawei's technological edge is unmatched, but its global reach is constrained. For Nokia, this presents an opportunity to fill the gap in markets where Huawei's access is limited, particularly in the U.S. and Europe.

Competitive Dynamics: Navigating a Fractured Market

The 6G market is not just a technical race-it is a geopolitical chess game. Nokia's U.S. investments and NVIDIA partnership are designed to align with American strategic interests, a move that could shield it from the regulatory headwinds faced by Huawei. Ericsson, with 45% of its 2025 revenue coming from the U.S. market, is similarly positioned to benefit from this alignment. However, both companies are losing ground in China, where local vendors are gaining traction. Nokia's mobile business, for instance, has seen a 10 percentage point drop in gross margin year-over-year, a trend that could accelerate as Chinese operators prioritize domestic suppliers.

The technological front is equally contested. Huawei's focus on terahertz communication and holographic networks according to market analysis represents a bold vision for 6G, but Nokia's acquisition of a quantum communications firm and its AI-RAN innovations with NVIDIA offer a complementary approach. The question is whether these investments will translate into market share gains or merely serve as defensive measures against Huawei's dominance.

Valuation Potential: A Balancing Act

Nokia's valuation multiples suggest a stock priced for growth but not yet for dominance. At a fair value of €5.43 per share according to financial analysis, the company trades at a premium to Ericsson's €12.15 P/E but lags behind Huawei's implied valuation, which is difficult to quantify due to restricted access to its financials. Analysts remain divided: some highlight improved execution in AI and optical networks as catalysts for upside, while others warn of capex risks and uneven performance in mobile infrastructure according to industry reports.

The broader market context is bullish. With the 6G market expected to reach $59.44 billion by 2031, even a modest increase in market share could translate into significant revenue. Nokia's anticipated 2025 operating profit range of €1.7 billion to €2.2 billion according to industry projections provides a floor, but the upside hinges on its ability to monetize AI-driven infrastructure and secure key partnerships.

Conclusion: A High-Stakes Gamble

Nokia's strategic positioning in the AI-6G era is ambitious and well-funded, but its success will depend on navigating a complex web of financial, technological, and geopolitical challenges. While the company's U.S. investments and NVIDIA collaboration offer a clear path to differentiation, its profitability in core telecom segments remains a liability. In a market where Huawei's R&D firepower and Ericsson's cost discipline are formidable competitors, Nokia must prove that its bets on AI and quantum communication will pay off. For investors, the question is not whether 6G will arrive-but whether Nokia can outmaneuver its rivals in the race to define it.