Why Morgan Stanley Turned Bullish on Nokia Amid the AI Infrastructure Boom

AI Data Centers Are Driving the Investment Thesis

The core reason behind Morgan Stanley’s optimism is the explosion of spending on AI infrastructure. Training and running large AI models requires enormous clusters of GPUs spread across massive data centers. Those clusters must be connected by extremely high‑capacity networking—an area where Nokia is increasingly active.

Morgan Stanley highlighted that Nokia’s exposure to AI and cloud networking demand has been rising, supported by hyperscalers rapidly expanding their data‑center footprints. The firm expects the addressable market tied to these workloads to grow more than 15% annually as cloud companies continue investing heavily in infrastructure.

Although AI and cloud services account for only about 6% of Nokia’s total revenue, the segment has been expanding steadily and represents a high‑growth opportunity relative to traditional telecom equipment markets.

Optical and IP Networking: Nokia’s Hyperscaler Opportunity

A major part of the story lies in optical and IP networking, the technologies used to connect servers, data centers, and regional cloud hubs.

Nokia’s optical networking unit supplies the high‑capacity fiber systems that link AI clusters across facilities, while its IP networking products help route enormous volumes of data between compute nodes. These capabilities position the company to benefit from hyperscalers’ rapidly rising capital expenditures on AI infrastructure.

Company guidance reflects this momentum. Nokia raised its expectations for Network Infrastructure revenue growth to 12–14% in 2026, with Optical and IP Networks expected to grow 18–20%, indicating that demand tied to AI data centers is accelerating.

Earnings commentary has reinforced that view, noting strong order activity from AI and cloud customers and a growing addressable market driven by the AI buildout.

Nvidia’s $1 Billion Investment Strengthens the AI Narrative

Another catalyst supporting the bullish outlook is Nokia’s strategic partnership with Nvidia.

In October 2025, Nvidia agreed to invest $1 billion in Nokia through a directed share issuance while forming a partnership to develop AI‑powered radio access network (AI‑RAN) technologies and next‑generation networking platforms.

The collaboration combines Nvidia’s accelerated computing stack with Nokia’s telecom infrastructure expertise. While the partnership primarily targets AI‑native mobile networks and future 6G systems, it also strengthens Nokia’s positioning in the broader AI networking ecosystem.

For investors, the deal signaled validation from one of the central companies in the AI boom.

Financial Stability Supports the Growth Story

The improving growth narrative is supported by relatively stable financial performance.

Nokia reported €2.0 billion in comparable operating profit and €1.5 billion in free cash flow in 2025, showing that the company’s turnaround has produced a solid financial base.

That stability matters because it means the AI‑driven growth opportunity is not coming from a distressed company but from an established infrastructure vendor with the balance sheet to invest in expansion.

Stock Performance and Analyst Sentiment

The market has started to price in this new narrative. After Morgan Stanley lifted its target to €8.50 in March 2026, the firm described the outlook as increasingly supported by rising AI infrastructure spending and improving demand for data‑center connectivity.

Other analysts have also turned more constructive, reflecting broader confidence that Nokia could benefit from the global race to build AI data centers and cloud infrastructure.

The Bigger Picture

Taken together, several forces are reshaping Nokia’s investment story:

• Surging AI data‑center infrastructure spending worldwide
• Growing demand for optical and IP networking used by hyperscalers
• Strategic validation through Nvidia’s $1B investment and AI‑RAN partnership
• Improved network infrastructure growth guidance from the company
• Increasing recognition from analysts that Nokia is tied to the AI infrastructure cycle

If these trends continue, Nokia may increasingly be viewed less as a traditional telecom vendor and more as a connectivity layer of the AI economy—a shift that explains the rising enthusiasm among analysts.

The key uncertainty is valuation. While Morgan Stanley’s confirmed price targets rose from €6.50 to €8.50 in 2026, speculation about significantly higher targets such as €14 remains unverified in credible reporting. Investors therefore need to separate the real analyst upgrades from the broader AI‑driven narrative surrounding the company.