Nokia Oyj (NOK) shares soared 10.17% during intraday trading on Wednesday, extending a sharp rally driven by the company’s strategic entry into the AI optical chip supply chain and an improved credit outlook.

The primary catalyst was Nokia’s recent announcement to acquire NXP Semiconductors’ wafer fabrication facility in Arizona, which it plans to convert into an indium phosphide optical chip production line. Indium phosphide is a critical material for optical interconnects in AI data centers, where the supply-demand gap is reportedly severe. This move positions Nokia at a key node in the AI optical chip supply chain, following similar large-scale investments by NVIDIA in Lumentum and Coherent to secure long-term supply of the material.

Additionally, S&P upgraded Nokia’s outlook to “positive” while affirming its “BBB-” credit rating, citing business diversification and stable cash flow. The positive sentiment also lifted the broader communication equipment sector, with peers like Lumentum and Applied Optoelectronics posting gains.