Nokia’s Radical Makeover: From Telecom Commodity to AI and Defense Contender

Nokia reinvents itself as an AI infrastructure and defense player, with revenue surging 49% in Q1. Shares hit 52-week highs amid Nvidia investment and Cisco tailwinds, though valuation at 91x earnings raises caution.

Nokia is no longer the network supplier that once traded at a price-to-earnings ratio of 35. A year on, those same shares have soared 158%, its P/E has ballooned to 91, and the company is being reimagined as an artificial intelligence infrastructure powerhouse with a growing foothold in military communications. The stock, which opened the year at roughly half its current level, now changes hands at €11.96 — down marginally from a fresh 52-week high of €12.55 hit midweek on a wave of product launches and sector-wide optimism.

The makeover began in earnest last October when Nvidia invested $1 billion in the Finnish company, tasking it with developing AI?native radio access networks that embed computing power directly into mobile infrastructure. That bet is already showing returns: in the first quarter, Nokia’s AI-related revenue jumped 49% to €1 billion. Encouraged, management lifted its medium?term outlook, now targeting an average annual growth rate of 27% for its addressable AI and cloud market through 2028 — a forecast that analysts at Morgan Stanley and Arete promptly endorsed with upward price?target revisions.

Diversification runs deeper than AI. Nokia has pushed into defence electronics via a partnership with US firm Anduril, building secure communications systems for military use. The move taps the group’s expertise in high?reliability networks and cushions its reliance on the mercurial telecoms cycle. The strategy appears prescient given the broader market jitters that surfaced on Friday: a hotter?than?expected US inflation reading of 3.8% sent the Nasdaq sliding, and Nokia shares gave back 4% as profit?taking accelerated.

The week’s strongest catalyst, however, came from across the Atlantic. Cisco reported quarterly revenue of $15.84 billion, beating Wall Street estimates, with its networking business expanding 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 routers and switches, calling the pickup in telecom orders a powerful indicator for the entire sector. The read?across was immediate and forceful.

Nokia reinforced its own narrative on Wednesday by unveiling a suite of “Agentic AI” tools for autonomous network management. The software can detect and correct faults without human intervention, a capability that lifted the stock more than 12% in a single session. To drive the pivot, CEO Justin Hotard is reshaping senior ranks: in September, Emma Falck, a physicist with a doctorate who joins from Siemens, will take charge of the Mobile Infrastructure division, tasked with steering the unit toward a software?centric business model.

The valuation has stretched to levels that make some observers uneasy. At 91 times trailing earnings, Nokia’s multiple is more than two?and?a?half times what it was a year ago. Management argues the premium is justified by the growth trajectory, but the risks are plain: a slowdown in telecom automation budgets or a loss of momentum at rivals like Cisco could quickly puncture the rally. For now, the stock sits just 5% below its multi?year high, and as long as it holds above the €11 support level, the steep uptrend remains intact.