Nokia’s Strategic Data Center Expansion in Malaysia and Its Implications for AI-Driven Cloud Infrastructure Growth

Nokia’s recent expansion in Malaysia’s data center ecosystem positions the company at the intersection of AI-driven cloud infrastructure and strategic geopolitical shifts. By partnering with Maxis and Telekom Malaysia to deploy cutting-edge networking solutions, Nokia is not only modernizing local infrastructure but also aligning with global demand for scalable, AI-optimized data centers. The deployment of technologies like the 7220 Interconnect Router and Event-Driven Automation (EDA) platform underscores Nokia’s focus on operational simplicity and reliability, critical for hyperscalers and AI workloads [1].

Malaysia’s government has further catalyzed this growth by introducing a streamlined framework for data center development, designating the Malaysian Investment Development Authority to oversee projects [2]. Nokia’s collaboration with Extreme Broadband to future-proof AI data centers in Cyberjaya, Johor Bahru, and Penang—aligned with the National Cloud Computing Policy—highlights its ability to address sector-specific demands, particularly in finance and telecommunications [3]. These moves position Nokia as a key enabler of Malaysia’s ambition to become a regional data center hub.

The competitive landscape for data center networking is intense, with rivals like Cisco, Arista, and Huawei dominating market share. However, Nokia’s recent recognition as a “Visionary” in Gartner’s Magic Quadrant for Data Center Switching signals its innovative edge [4]. The acquisition of Infinera has bolstered its optical networking capabilities, enabling access to hyperscale customers and enhancing its DCI (Data Center Interconnect) offerings [5]. This strategic depth is critical as AI workloads drive demand for high-capacity, low-latency infrastructure.

Financially, Nokia faces headwinds, including currency fluctuations and tariffs, which have pressured its 2025 operating profit guidance. Yet, its Network Infrastructure segment grew 8% in Q2 2025, outpacing Mobile Networks, driven by IP and optical solutions [1]. The Cloud and Network Services segment also saw 14% growth, supported by 5G Core momentum. These results, coupled with a strong book-to-bill ratio in Optical Networks, suggest resilience amid macroeconomic challenges.

The AI-driven cloud infrastructure market is projected to grow at a staggering 39.7% CAGR, reaching $647.6 billion by 2030 [5]. Nokia’s partnerships with hyperscalers and its focus on quantum-safe networks and automation align with this trajectory. However, the company must navigate risks such as rising capital expenditures (estimated at $6.7 trillion globally by 2030) and energy demands [6].

Long-term value creation for Nokia hinges on its ability to leverage AI’s symbiotic relationship with cloud infrastructure. By addressing both the technical and regulatory dimensions of data center expansion—such as Malaysia’s policy framework and global energy challenges—Nokia can solidify its role in the AI supercycle. While short-term financial pressures persist, its strategic investments in optical networking, automation, and AI-native infrastructure position it to capture a significant share of the $1.01 trillion AI market by 2031 [4].

Source:
[1] Nokia Corporation Report for Q2 and Half Year 2025 [https://www.nokia.com/newsroom/nokia-corporation-report-for-q2-and-half-year-2025/]
[2] Malaysia Establish Data Centre Framework to Streamline Policies [https://www.reuters.com/markets/emerging/malaysia-establish-data-centre-framework-streamline-policies-2025-07-22/]
[3] Nokia partners with Extreme Broadband to improve security and future-proof data centers in Malaysia [https://www.globenewswire.com/news-release/2025/09/02/3142304/0/en/Nokia-partners-with-Extreme-Broadband-to-improve-security-and-future-proof-data-centers-in-Malaysia.html]
[4] Gartner: Nokia is a data center switching Visionary [https://www.nokia.com/blog/nokia-named-as-a-visionary-in-the-2025-gartner-magic-quadrant-for-data-center-switching/]
[5] Cloud AI Market Size, Share & Trends [https://www.grandviewresearch.com/industry-analysis/cloud-ai-market-report]
[6] AI to drive 165% increase in data center power demand by 2030 [https://www.goldmansachs.com/insights/articles/ai-to-drive-165-increase-in-data-center-power-demand-by-2030]