Nokia reinvented itself as an AI infrastructure and defense player, and its first quarter revenue soared 49%. Nvidia’s investment and Cisco’s tailwind pushed the stock to a 52-week high, but the company’s valuation of 91 times P/E is cause for alarm.
Nokia is no longer the network supplier that once traded at a price-to-earnings multiple of 35 times. A year later, that same stock has soared 158%, its P/E ratio has ballooned to 91x, and the company has been repositioned as an artificial intelligence infrastructure powerhouse with a foothold in military communications. The stock, which started the year at about half its current level, now trades at 11.96 euros, down slightly from its 52-week high of 12.55 euros hit in midweek following a wave of product launches and optimism across the sector.
The transformation began in earnest last October when Nvidia invested $1 billion in the Finnish company, tasked with developing an AI-native radio access network that embeds computing power directly into mobile infrastructure. The bet is already paying off, with Nokia’s AI-related revenue increasing by 49% to €1 billion in the first quarter. Encouraged by this, management has raised its medium-term outlook, targeting a compound annual growth rate of 27% for the addressable AI and cloud market through 2028. Analysts at Morgan Stanley and Arete immediately endorsed this prediction and revised their price targets upward.
Diversification runs deeper than AI. Nokia is moving into defense electronics through a partnership with US company Anduril to build secure communications systems for military use. The move leverages the group’s expertise in high-reliability networks and reduces dependence on fickle communication cycles. This strategy seems prescient given the market-wide turmoil that surfaced on Friday. The Nasdaq fell as U.S. inflation rose above expectations at 3.8%, while Nokia shares rallied 4% as profit-taking accelerated.
Should investors sell now, or is Nokia worth buying?
But the most powerful catalyst this week came from across the Atlantic. Cisco reported quarterly revenue of $15.84 billion, beating Wall Street expectations, as its networking business grew 25%. The US group also raised its AI order forecast to $9 billion. Jefferies analyst William Beavington noted that Nokia competes directly with Cisco in the router and switch space, and said the rebound in telecom orders was a strong indicator for the sector as a whole. The reading was immediate and powerful.
Nokia strengthened its case on Wednesday by announcing a suite of “Agentic AI” tools for autonomous network management. The software was able to detect and correct failures without human intervention, and this ability helped the stock price rise more than 12% in a single session. To further pivot, CEO Justin Hotard is reorganizing senior leadership. In September, Emma Falk, a PhD physicist who joined from Siemens, will become head of mobile infrastructure, tasked with guiding the division towards a software-centric business model.
Valuations have reached levels that are worrying some observers. At a price-to-earnings ratio of 91 times, Nokia’s multiple is more than 2.5 times where it was a year ago. Management claims this premium is justified by its growth trajectory, but the risks are clear. A slowdown in telecom automation spending or a loss of momentum at rivals like Cisco could quickly punctuate the stock’s rally. For now, the stock is just 5% below its multi-year high, but the upward trend remains intact as long as it remains above the €11 support level.
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Nokia Stock: New Analysis – May 17th
The latest information from Nokia has been released. What are the implications for investors? Our latest independent report examines recent numbers and market trends.
Read our latest Nokia analysis…
