Nokia Stock: Undervalued AI Infrastructure Play?

Nokia is more than the phone brand you remember. With optical networking growth and AI data center demand, the stock may be 23% undervalued. Read our full anal…

The last time most people thought about Nokia, they were probably snapping a flip phone shut or watching a Lumia fail to gain traction against the iPhone. That was over a decade ago. The company that once owned the mobile handset market has since become a ghost in the consumer tech aisle, and for investors, it’s been easy to write off as a value trap with a famous name. But here’s the thing: the [AI](/dgtg/blog/seo-in-the-age-of-ai-how-to-adapt-your-strategy-for-2026) boom doesn’t run on GPUs alone. It runs on networks. And Nokia is quietly selling the picks and shovels to build the backbone of the data center boom. While Nvidia and AMD hog the headlines with their quarterly blowouts, Nokia has been plugging away at optical networking, IP routing, and private 5G for industrial AI use cases. The stock has been drifting sideways for years, but a recent wave of AI infrastructure news suggests the market may be underpricing the Finnish firm’s relevance. Some analysts peg the stock as potentially 23% undervalued based on its AI infrastructure roadmap. Let’s dig into whether that number holds water or if it’s just analyst hopium. ## The Case for "Boring" Infrastructure We need to separate the narrative from the numbers. Nokia’s consumer brand is a relic, but its enterprise and network infrastructure divisions are the real story. The company’s Network Infrastructure segment, which includes fixed networks, IP routing, and optical networks, is the crown jewel here. Why does that matter for AI? Because training clusters aren’t islands. When you stand up a massive GPU cluster, you need to move terabytes of data between nodes, storage arrays, and external clients. This requires high-bandwidth, low-latency optical interconnect. Nokia’s acquisition of Infinera, which closed in late 2024, wasn’t a random consolidation play-it was a direct bet on the fact that AI data centers are becoming bandwidth hogs. Here’s a quick breakdown of where Nokia’s revenue actually comes from today: | Segment | Focus | AI Relevance | | --- | --- | --- | | Network Infrastructure | Optical, IP, fixed networks | High, backbone of data center interconnect | | Mobile Networks | 5G radios, RAN | Medium, private 5G for factories and edge AI | | Cloud and Network Services | Software, core networks | Medium, automation and orchestration | | Nokia Technologies | Patents and licensing | Low, steady cash cow, not a growth story | The optical networking business is the standout. AI data centers are moving from 400G to 800G and even 1.6T optical interconnects. Nokia’s PSE-6s chipsets are already powering some of the most advanced long-haul and metro networks. This isn't speculative tech; it's shipping today. ## The Valuation Math Here’s where the "undervalued" thesis gets interesting. Nokia trades at a forward price-to-earnings ratio of around 11 to 12, depending on the week. Compare that to Cisco at 15, or Arista at 40+, or Nvidia at 30+ (when it’s not spiking). For a company with a net cash position, a patent licensing arm that generates billions in pure profit, and a growing share in optical networking, that multiple looks cheap. But cheap can be a trap. Let’s look at the actual drivers. - **Infinera synergy:** The acquisition gives Nokia scale in optical components, which lowers the cost of goods and expands margins. They’re targeting $200 million in cost synergies by 2027. That’s real money, but it’s baked into the stock price only if management executes cleanly. - **Data center interconnect (DCI) wins:** Nokia has been winning contracts with hyperscalers and large colocation providers. They don’t name names often, but the order book for DCI gear has been growing double digits year over year. - **The patent machine:** Nokia’s licensing division is a cash printer. They’ve settled with Samsung and Oppo, and they’re now going after the connected vehicle market. This segment alone is worth a significant chunk of the market cap, making the core networking business look even cheaper on a sum-of-the-parts basis. The bear case is just as clear. Nokia’s mobile networks business is flat at best. Telecom operators are still skittish about 5G capex, and the RAN market is a price war with Ericsson and Huawei (outside of Western markets). If the optical story stumbles, the stock has no floor. ## AI Infrastructure Stocks: The Broader Context We can’t talk about Nokia without zooming out. The AI infrastructure trade has been brutally bifurcated. On one side, you have the "picks and shovels" darlings like Vertiv (cooling), Corning (fiber), and Broadcom (custom silicon). These stocks have already re-rated massively. On the other side, you have legacy telecom and networking vendors that haven’t gotten the same love. Why the disconnect? Investors are lazy. They see "Nokia" and think of the phone that lost to the iPhone. They see "Ericsson" and think of the same thing. The market is efficient, but it’s not always imaginative. This is where the alpha opportunity lies for those willing to look past the brand. The AI infrastructure buildout is a multi-year cycle. We’re talking about power grids, cooling systems, fiber routes, and optical gear. The GPU cluster is the star of the show, but the supporting cast is where the margins are stabilizing. ### Where Nokia Fits in the Stack - **Optical transport:** The physical layer that connects data centers. Nokia is a top-three player here. - **IP routing:** The brain of the network. Nokia’s FP5 routing silicon is competitive with Cisco’s. - **Private wireless:** Factories using AI for predictive maintenance need reliable, low-latency connections. Nokia is the market leader in industrial 5G. If you look at the AI infrastructure stocks list, you’ll see a lot of names trading at 20-30 times forward earnings. Nokia sits at half that multiple with a similar growth trajectory in its core networking segment. That’s the crux of the undervaluation thesis. ## Our Take: What We Recommend We’re not financial advisors, and we don’t play one on the internet. But we do read balance sheets and we do track the hardware roadmaps. Here’s our honest assessment for tech-savvy investors looking at undervalued tech stocks. **The cautious buy:** If you’re building a diversified tech portfolio, Nokia is a reasonable allocation for the "boring infrastructure" sleeve. The dividend yield is around 3%, which gives you a cushion while you wait for the re-rating. We’d suggest a starter position now, with a plan to add if the stock dips below the €4 mark (on the Helsinki exchange) or the equivalent ADR level. **The catalyst watch:** The stock won’t move until Nokia posts a quarter where they explicitly quantify the AI-related order backlog. Management has been talking about it, but they need to put a number on it. Watch the Q2 earnings call for any mention of "AI-driven optical demand" or "hyperscaler design wins." **What we’d avoid:** Don’t buy Nokia for the mobile networks turnaround. It’s not coming. The future is in the network infrastructure division, and if you’re not buying for that, you’re buying a value trap. **Our top pick in the space:** If we had to choose between Nokia and its peers, we’d take Nokia over Ericsson every day of the week. Ericsson has the same RAN problems but lacks the optical upside. We’d also note that Ciena is a purer play on optical, but it trades at a much higher multiple. Nokia offers the better risk-reward if you believe the AI data center buildout is still in the early innings. ## The Risks Nobody Wants to Talk About Let’s be clear-eyed. Nokia has a history of disappointing on guidance. They’ve missed numbers before, and the stock has a habit of getting punished harshly for it. The Infinera integration could also hit snags-merging two silicon teams is never easy. There’s also the geopolitics. Nokia is heavily exposed to Europe and India. The Indian market has been a growth driver, but it’s also price-sensitive and volatile. If the Indian telecom capex cycle slows down, that hits the mobile networks segment hard. And while the patent business is a cash cow, it’s also a legal battleground. Every licensing deal is a negotiation, and the outcome is unpredictable. A bad ruling in one jurisdiction could dent the licensing revenue stream. ## FAQ **Is Nokia a good AI stock to buy right now?** It’s not a pure-play AI stock, but it’s a solid infrastructure play for the AI buildout. The stock is undervalued relative to its growth potential in optical networking and data center interconnect, and it pays a dividend while you wait. If you’re looking for immediate AI momentum, look elsewhere; if you’re patient, it’s worth a look. **What is the price target for Nokia stock?** Analyst targets vary, but the consensus hovers around a 20-25% upside from current levels. The "23% undervalued" figure cited in recent analysis aligns with that range. The key variable is whether the optical networking segment can sustain double-digit growth. **Why is Nokia stock so cheap?** The market still prices Nokia based on its legacy mobile phone brand and the declining RAN market. The networking infrastructure business, which is the real growth engine, gets less attention. That disconnect is the source of the undervaluation.

Nokia Stock: Undervalued AI Infrastructure Play?

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