Nokia's CEO says customers would build AI data centers twice as fast if memory and power allowed

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 ^[7]. He did not put a figure on that demand.