Nokia Oyj's shares closed at 13.84 euros in Helsinki on Tuesday, marking a 5.9% gain and touching a 52-week high of 13.98 euros during the session. The stock has soared over 140% year-to-date, trading at levels not seen since 2008, according to Bloomberg data. The OMX Helsinki 25 index edged up 0.36% to 6,556.86.
AI-Driven Growth and Valuation Concerns
The rally has been fueled by growing investor interest in Nokia's AI and cloud infrastructure business, which now accounts for 8% of total group sales. First-quarter revenue from AI and cloud customers jumped 49% year-over-year, while operating profit rose 54% to 281 million euros, beating analyst estimates of 250 million euros. CEO Justin Hotard noted that demand had "accelerated significantly," and the company now targets a 27% annual growth rate for its AI and cloud addressable market from 2025 to 2028, up from prior guidance.
However, the rapid ascent has shifted the conversation from recovery to valuation. The 12-month forward price-to-earnings ratio has more than doubled to near 36, from about 17 at the start of the year. "The easy rerating is gone," said Amanda Lyons, head of research at Energy Group Capital. Analysts at Morgan Stanley warned that near-term earnings targets could overlook the lasting value from AI-driven demand, while UBS suggested that Nokia might be better valued by separating its AI-exposed segments from slower-growth businesses.
Market Position and Competitive Landscape
Nokia is increasingly seen as a data-center infrastructure play rather than a legacy telecom supplier, drawing comparisons to U.S.-listed Arista Networks and Ciena. BNP Paribas analyst Jakob Bluestone noted that some investors see a "mini-Arista" and "mini-Ciena" within Nokia, though he cautioned that the "old Nokia" is still present. The company's optical networking hardware, which moves big data between servers, has attracted fresh interest from hyperscale cloud providers.
Despite the AI buzz, Nokia's mobile networks division still accounts for more than half of total sales and operates at lower margins than the AI segment. Carrier spending remains under pressure, and some analysts express caution about the sustainability of the cloud-driven order surge. Sondre Solvoll Bakketun, portfolio manager at Skagen Vekst, noted that the AI business could face oversupply later, so the next rally may depend on broader orders and stronger profit growth.
Strategic Initiatives and Future Outlook
Nokia continues to push its AI narrative, launching an AI Networking Innovation Lab in Sunnyvale, California on May 21. Early technology partners include AMD, Keysight, Lenovo, Nscale, Supermicro, VIAVI, and Weka. Rudy Hoebeke, Nokia's vice president for software product management, described the launch as a "major milestone."
For now, the market is pricing Nokia more like an AI infrastructure play than a traditional telecom name, but investors are waiting for more evidence that the cloud deals represent a sustained trend rather than a temporary spike. The stock's performance has made it one of the top gainers on the Stoxx Europe 600 index, ranking fourth this year. Whether the rally can continue will depend on Nokia's ability to convert its AI ambitions into consistent earnings growth.
