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Nokia's CEO says customers would build AI data centers twice as fast if memory and power allowed
Nokia CEO Justin Hotard says customers would build AI data centers twice as fast without shortages of memory chips and power. Nokia's own order book supports his point about the pace of building, while leaving open whether demand for AI services will repay the spending.
The Investor · Invest desk
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What happened
- Nokia sells the networking that links racks of chips inside data centers and connects data centers in different locations.
- Hotard spoke after Anthropic CEO Dario Amodei called for slowing work on the most advanced models, a call CNBC tied to a sell-off in AI stocks last month.
- Research presented at the Brookings Papers on Economic Activity puts AI buildout investment at $10.3 trillion from 2025 to 2032, about 3.63% of US GDP a year.
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Why it matters
- exposure A longer memory and power shortage strengthens Hotard's claim that demand outruns supply, and it also pushes back the date Nokia can bill the later half of its backlog.
- decision After a roughly 130% gain in a year, Nokia shareholders have to judge whether orders placed during a shortage keep arriving once supply catches up.
- contradiction CNBC ties the buildout's payoff to long-run demand for AI services that must support debt and joint-venture financing, while Nokia's orders measure only the capital spending that comes first.
Nokia's AI and cloud unit booked about 6.3 euros of new orders for every euro it billed in the second quarter [16]. A year earlier the same quarter brought in roughly 223 million euros of sales [15]. The unit is still a small part of Nokia: at 9.3% of group sales [10], it implies a company billing about 4.8 billion euros a quarter [14].
Nokia expects half of the new orders to become revenue within a year [12]. Half of 2.8 billion euros is about 1.4 billion euros [17], and from a single quarter's bookings that equals about 78% of what the unit would bill over four quarters at its second-quarter pace [18]. The rest converts after that, on a timetable Nokia shares with customers who are short of memory chips and energy [2].
Hotard's own words put Nokia inside the constraint. "I don't think you can say in any manner we're overbuilding today because reality is that if we could build 2x faster, our customers could build 2x faster, they probably would," he said on CNBC's "The Tech Download" podcast [1]. In that sentence the first "we" appears to be Nokia, whose customers can build only as fast as it ships. Nokia is acting on that reading: it has partnered with Nvidia and invested in optical manufacturing [13].
The same order book fits more than one outcome. If memory and power supply eases and orders hold near 2.8 billion euros a quarter [11], Hotard was right about both pace and demand; if supply eases and orders fall, part of this backlog was customers booking early to hold a place in a queue; and if the shortages last, the later half of the backlog slides further out [2].
I think the order book supports Hotard on pace and leaves the overbuilding question open. A networking supplier sees a capital commitment when the order lands [3], years before the AI service revenue that has to repay it. Hotard argues that deploying today's models will carry demand on its own. "Even if we didn't have another frontier model released in the next three years, we could probably make tremendous progress just deploying the technology that's there today," he said [8]. He did not put a figure on that demand.
What to watch
- Nokia's third-quarter AI and cloud order intake, the first reading after the 2.8 billion euro quarter.
- Whether the unit's quarterly sales climb over the next year as Nokia's guidance on converting half the second-quarter orders plays out.
- Any easing in memory chip and power supply, the condition under which Hotard's claim that customers would build twice as fast can actually be tested.