Nokia Oyj (NOK) shares fell 3.32% to €12.54 in Helsinki on Monday, pulling back from a five-day surge of 10.06% as the broader artificial intelligence trade showed signs of cooling. The stock opened at €13.36, touched a high of €13.38, then slid to a low of €12.26 before settling near the close. In New York, the company's American depositary receipts (ADRs) edged up 0.14% to $14.82.
The decline came despite a record-setting session for European equities, with the STOXX 600 index closing at an all-time high on Monday. A U.S.-Iran deal that eased oil prices and helped temper inflation expectations provided a tailwind for most markets, but Nokia was among the early winners in the AI infrastructure trade that saw profit-taking ahead of the company's second-quarter earnings report scheduled for July 23.
Nokia's shares have surged approximately 74% over the past three months, driven by optimism around AI-driven demand for optical networking, IP routing, and data center equipment. The company's first-quarter results, reported in April, showed comparable net sales up 4% year-over-year, with comparable operating profit jumping 54% to €281 million. Sales to AI and cloud customers soared 49%, reinforcing the bullish narrative.
CEO Justin Hotard emphasized the company's strategic focus, stating, "We are increasing our growth assumption for Optical and IP Networks and we are investing to capture accelerating demand from AI & Cloud customers." Nokia's full-year comparable operating profit outlook remains unchanged at €2.0 billion to €2.5 billion.
However, valuation concerns are mounting. MarketScreener's analyst consensus rates the stock as "Outperform," but the average price target of €10.24 sits roughly 18% below Monday's closing price of €12.54. In the U.S., MarketBeat tracks 18 analysts with a "Moderate Buy" rating, yet their average target of $12.57 lags the recent ADR price of $14.83. High earnings multiples are flagged as a key valuation risk.
For the second quarter, analysts expect net sales to climb 5% to 9% sequentially, while comparable operating profit is anticipated to fall within Nokia's previously guided 12% to 16% full-year margin band. Free cash flow may come under pressure as the company ramps up capital spending to expand optical-network capacity.
Monday's pullback suggests that investors are taking a breather, waiting for tangible proof that the rapid gains are justified. The stock now trades well above most analyst targets, leaving little room for error. If Q2 numbers confirm continued momentum in AI and cloud demand, further upside is possible. But any shortfall could trigger a sharp correction given the elevated expectations.
Nokia's journey reflects the broader market's tug-of-war between AI optimism and valuation discipline. With the July 23 report acting as a critical catalyst, all eyes will be on execution. The coming weeks will determine whether the AI rally has further to run or if caution will take hold.
