Nokia’s 96% Rally Pits AI Cloud Boom Against a Stretched Valuation

Nokia's stock surges 96% in 2026 on AI-driven demand and Infinera deal, but high valuation and profit-taking raise caution among analysts.

Nokia’s stock has nearly doubled in 2026, but the question hanging over the market is whether the rally has run too far, too fast. After closing at €10.87 on Friday — a gain of roughly 96% since January — the Finnish telecom equipment maker finds itself in a tug-of-war between surging AI-driven demand and a valuation that leaves little room for error.

The catalyst for the re-rating was Nokia’s first-quarter earnings report, which landed with enough force to trigger a wave of analyst upgrades. Revenue came in at €4.5 billion, up 4% year-on-year, while earnings per share jumped 67%. The standout performer was the optical networks business, where sales rose 20%, powered by the acquisition of Infinera. That deal has transformed Nokia from a component supplier into a vertically integrated provider of optical and IP networking solutions, backed by a research and development budget of roughly €2 billion annually.

The AI and cloud segment was the real headline-grabber: revenue surged 49%, and the company booked around €1 billion in new orders from hyperscale data center operators. Those customers are now building out distributed AI campuses rather than single facilities, driving demand for the high-speed optical gear Nokia sells. At the same time, European governments are pushing Chinese vendors like Huawei and ZTE out of critical infrastructure, creating an additional tailwind as operators replace existing systems.

The financials reflected the momentum. Gross margin expanded by 320 basis points to 45.5%, while free cash flow hit €629 million. Nokia’s chief financial officer noted that the synergies from the Infinera acquisition are materializing faster than originally planned.

Wall Street has taken notice. JPMorgan lifted its price target from €6.90 to €12.00, keeping an overweight rating. Morgan Stanley followed with an increase to €11.00, also overweight. Argus upgraded the stock from hold to buy, setting a target of $15 and citing the Infinera deal and rising AI-related demand. Barclays remains the outlier: it raised its target to €8.00 but kept an underweight rating, arguing that too much growth optimism is already baked into the share price.

The valuation numbers give that caution some weight. Nokia’s trailing price-to-earnings ratio stands at roughly 83 — nearly double its 12-month average. The forward P/E of 27 still implies significant earnings growth ahead. The stock’s distance from its 200-day moving average is about 87%, a measure that underscores how far and how fast the shares have climbed. The relative strength index has eased to 61.7, suggesting some of the short-term overheating has dissipated, but the gap to the 52-week high of €11.48 is less than 5%.

Profit-taking hit hard on Thursday, when the stock fell more than 6% on above-average volume, driven by a combination of valuation concerns and broader jitters about AI-related equities. Friday brought a partial recovery, with shares gaining nearly 4%.

Nokia has raised its full-year guidance for the network infrastructure segment, now expecting revenue growth of 12% to 14% in 2026. The optical and IP networks combined are forecast to expand by 18% to 20%. The company has also increased its estimate for the addressable AI and cloud market to an annual growth rate of 27%, up from 16% previously. That revision reflects a dramatic increase in expected capital spending by hyperscale cloud providers, which has climbed from $540 billion in November to more than $700 billion for 2026.

The next scheduled earnings report is due on July 23. Until then, the stock is likely to be driven by signals from the hyperscaler camp and data on global data center spending. If those trends hold, Nokia’s growth story remains intact. If they falter, the high valuation leaves the shares exposed to a sharp correction — as Thursday’s selloff briefly demonstrated.