Catenaa, Tuesday, May 26, 2026- A rally of over 152% so far this year in Nokia is forcing investors to reconsider the company not as an old telecom-equipment stock, but as part of the infrastructure underpinning the AI boom.
Shares of the Finnish company have surged more than 152% this year, making it the fourth-best performer in the Stoxx Europe 600. The stock is at the highest levels since 2008, thanks to soaring demand for its optical equipment that’s playing a bigger role in data centers.
The rally has already transformed how the market values the stock. Its 12-month forward price-to-earnings ratio has more than doubled to about 36 times, from roughly 17 times at the start of the year.
Yet the AI and cloud business behind much of the excitement still accounted for just 8% of group sales in the first quarter, underscoring the debate over how much future growth investors should price in today.
Shares of optical component makers have soared this year as investors search for fresh targets with exposure to the AI boom. In the US, Lumentum Holdings and Coherent more than doubled. In Europe, Soitec and Aixtron SE have also posted strong gains.
Once known for its sturdy handsets, the iconic Snake game, and a global mobile-phone market share that peaked at roughly 40%, Nokia has spent years as a symbol of faded technology eminence. The shares are still trading nearly 80% below their 2000 peak.
Since selling its mobile phone business to Microsoft in 2014, it has refocused on telecom infrastructure, a market with little growth predicted in the next 10 years as the 5G network buildout matures in many countries.
Nokia’s acquisition of Infinera last year bolstered its positioning in optical networking, just as the rising use of AI tools requires faster and more efficient movement of data between computing clusters.
The investment is bearing fruit already: AI-related sales grew by 49% in the first quarter. In April, it raised the guidance for the segments exposed to cloud customers.
Nvidia’s $1 billion investment in Nokia gave investors another reason to see it as part of the AI infrastructure trade rather than just a legacy telecom-equipment supplier.
Under the deal, Nvidia’s chips will be used to accelerate Nokia’s software for 5G and 6G networks, and Nvidia will explore ways to use Nokia’s data center technology in its own AI infrastructure.
These wins have pushed some to rethink how Nokia should be valued. Morgan Stanley analysts, for example, said price targets based mainly on next year’s earnings risk missing the bigger picture if AI-related demand supports growth over a longer period. They argue that a valuation approach giving more weight to future cash flows better captures that potential.
UBS takes a more segmented view. Its analysts said Nokia may be better assessed through a sum-of-the-parts framework, because investors are unlikely to apply the same multiple to its AI-exposed networking assets as they do to slower-growing parts of the business.
Analyst views have yet to fully catch up with the rally, with the average price target still 25% below the current price. Less than half of analysts tracked by Bloomberg rate the stock as a buy.
For Nokia, its core business of mobile networks remains a big drag. It still accounts for over half of overall sales and commands a lower operating margin than the AI-exposed segment. It has struggled to grow for years due to a reduced spending budget at telecom carriers and key contract losses in the US.
Nokia trades at a more than 50% discount to Ciena on a 12-month forward price-to-earnings basis. Ciena gives investors a more direct way to play optical-networking demand from AI and cloud spending. At Nokia, the same exposure is still only part of a broader group.
