Nokia's AI Pivot: The Quiet Stock Wall Street Just Noticed

Wall Street just noticed a quiet but powerful shift. Morgan Stanley upgraded Nokia to "overweight" and slapped a price target of €6.50 on it, calling it a "Top Pick" for AI and cloud growth. This isn't just noise; it's a real alpha leak from a major bank.

The catalyst is clear: Nokia's strategic pivot is finally showing up in the numbers. AI & Cloud now represents 6% of group revenues, and it's growing at a blistering pace-increasing by about 1 percentage point each quarter. That's a concrete, accelerating metric that follows the Infinera acquisition and the company's November 2025 announcement to focus on AI-driven networks.

This upgrade signals that Morgan Stanley sees the setup: a leaner Nokia, with its optical networking unit positioned right in the middle of the data center construction boom. The bank's bullish view on order momentum and its 2028 EBIT forecast above consensus suggest the market is still catching up.

The Breakdown: From Telecom to Data Center Engine

The pivot is real. Nokia is no longer just a telecom supplier. Its strategic reorganization, effective January 1, 2026, splits the company into two segments, with Network Infrastructure now the clear growth engine. This unit houses its optical networking business, which provides the critical fiber backbone for data centers.

That's the new play. As hyperscalers like Amazon and Microsoft pour capital into AI infrastructure, they are investing more each quarter than telecom giants do in a full year. Nokia's optical unit sits right in the middle of this boom, connecting and powering the data centers that run AI. The numbers show it: optical networking orders are up more than 40%, and data center switching orders are surging over 150%.

Financially, the company is setting a bold target. Its new long-term goal is to grow comparable operating profit to a range of EUR 2.7 to 3.2 billion by 2028. That's a significant stretch from where it is today, but it's anchored in the AI & Cloud segment, which now represents 6% of revenues and is growing at a point-per-quarter clip.

The old telecom model is stabilizing. After years of decline, mobile networks revenues could stabilize as the company navigates the loss of over €500 million annually in AT&T-related contracts. At the same time, cloud and network services are rebounding, helping to balance the portfolio. The bottom line is a company shedding its cyclical telecom dependency and building a more resilient, AI-driven profit engine.

The Verdict: Valuation, Catalysts & Watchlist

The upgrade is real, and the stock is moving. On Thursday, Nokia shares closed at $6.61, up 3.93% on high volume, showing clear market attention. Yet, for all the bullish talk, the valuation still doesn't fully reflect the AI pivot. As Morgan Stanley notes, Nokia is still valued in line with historical levels prior to other technology cycles, meaning the market is underestimating its exposure to the data center boom.

So, is this a breakout? Not yet. The pop is a reaction to a catalyst, not a definitive signal. The real test is what happens next. The key near-term triggers are concrete: quarterly results showing continued AI/cloud growth and any updates on the execution of the new 2028 financial targets. The bank's bullish 2028 EBIT forecast above consensus needs to start translating into reported numbers.

For investors, this sets up a watchlist. The stock is priced for a story that's just beginning to be told. The catalysts are clear-order momentum in optical networks and data center switching is already strong. The question is whether Nokia can keep accelerating that growth to justify a re-rating. The setup is there; the market just needs to catch up.