Shares of Nokia Corporation (NYSE: NOK) surged more than 20% on Tuesday, marking one of the stock's strongest single-day rallies this year amid unusually heavy trading volume

As part of the deal, Nvidia plans to make a $1 billion investment in Nokia in exchange for a 2.9% stake in the Finnish networking pioneer. To facilitate the transaction, Nokia will issue 166,389,351 new shares, which Nvidia will purchase for $6.01 per share.

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In a surprising move revealed Tuesday, Nvidia ( NVDA +4.98%) announced it was taking a $1 billion investment stake in Nokia ( NOK +22.84%). The news pushed Nokia stock up 22.8% in the day's trading and rocketed its market capitalization up to approximately $41.8 billion -- its highest level in well over a decade.

The Finnish telecom equipment maker announced a strategic alliance with the U.S. chip giant focused on AI-powered radio access networks (AI-RAN) and data center networking. As part of the deal, Nvidia will invest $1 billion in Nokia shares, equivalent to roughly 2.9% of its outstanding stock.

A large volume of long-dated put options has traded in Nokia stock following Nvidia, Inc.'s $1 billion stake in new NOK shares. Nokia, which makes 5G cellular equipment, will use the money for AI-related investments.