For years, Nokia seemed to be trapped in our memory as a company from the past: indestructible mobile phones, the ‘Snake’, recognizable ringtones and a fall that ended up becoming a warning for the entire technology industry. But that image is somewhat unfair. Nokia did not disappear when it lost its step in the smartphone market. The company continued to exist, far from the consumer’s showcase, in a less visible and much more difficult to explain business: the networks, the infrastructure for operators and the technology that allows modern communications to work. And now, suddenly, AI has put it back on the map.
The stock market turn. According to Bloomberg, Nokia shares have risen more than 140% so far this year, a move that has made it the fourth best value in the Stoxx Europe 600 and has taken its shares to levels not seen since 2008. The key is that investors are beginning to read the company in a different way: less as a traditional supplier of telecommunications equipment and more as a piece of the infrastructure that can sustain the rise of AI. Not for phones, but for their optical equipment for data centers.
The important clarification. The firm of the increase is Nokia Oyj, not HMD Global. The difference matters because HMD is the company that has marketed mobile phones under the Nokia brand under license, while Nokia Oyj is the listed Finnish company. The separation point came in 2014, with the sale of the mobile division to Microsoft. From then on, the Nokia name continued to circulate on two different levels: as a recognizable brand for many consumers and as an industrial company within the global telecommunications market.
An assessment that becomes complicated. The stock market euphoria has left Nokia in a delicate position: the more a stock rises, the harder it is to justify what comes next. Information from the American economic media places its 12-month forward P/E, the relationship between the share price and the expected profits for the next year, at about 36 times, more than double the approximately 17 times at the beginning of the year. The data that cools the enthusiasm is another: the part linked to AI and cloud, which is fueling much of the new narrative, barely represented 8% of the group’s sales in the first quarter.
The technical piece. Nokia’s appeal lies in a layer that often falls beneath the more visible narrative of AI. While much of the conversation revolves around chips, models and applications, data centers also need optical networks to move information quickly between computing systems. The purchase of Infinera, a company specialized in optical networks, gave Nokia more muscle in that field and now seems a particularly timely operation. Added to this are three signals collected by Bloomberg: sales linked to AI grew by 49% in the first quarter, the company raised its forecasts in April for segments exposed to cloud clients, and NVIDIA made an investment of $1 billion.
The bottom ballast. The enthusiasm for optical networks does not erase the size of the business that Nokia already had before investors began to read it in terms of AI. The mobile networks division still contributes more than half of total sales and, according to the information cited by the American economic media, works with lower margins than the part more linked to cloud and artificial intelligence. That weight conditions any optimistic reading. Operators have reduced spending in recent years and Nokia has also suffered important contract losses in the United States, so the company is not starting from a blank slate.
The real test. For years, the big question around Nokia was whether anyone would look at it again as anything more than a memory of another technological era. That part, at least in the stock market, has already happened. The problem is that investors do not forgive second chances when they become too expensive: after a rise of more than 140%, the company no longer only has to prove that it has exposure to AI, but that that exposure can be converted into orders, revenues and margins. The story is attractive again. Now the most difficult thing remains: for the numbers to be up to par.
Images | NOKIA
In | Huawei has found a way to counteract US sanctions: overcoming Moore’s Law
