Powered by AI, Nokia re-emerges with a new look

Around the year 2000, Nokia, which held a 26% share of the global mobile phone market, introduced its famous '3310' model, selling 126 million units. Although this product, then dubbed an 'indestructible' phone, showed a promising future, their market dominance suffered a severe decline due to their failure to adapt to smartphone technology.

However, this Finnish company, which demonstrated the durability and resilience of its products, is now strongly re-emerging with the wave of Artificial Intelligence (AI). Accordingly, their stock value is expected to have increased by about 70% by 2026, and Nokia has also been re-included in the Euro Stoxx 50 index this week, which gathers the 50 largest capitalized companies in the Eurozone.

Nokia currently does not manufacture any mobile phones. After selling its devices and services division to Microsoft in 2014, they shifted their business focus to providing mobile infrastructure, which still accounts for over half of the company's revenue. However, their most significant growth currently comes from operations supporting data centers, which has already grown to nearly 30% of total revenue. With this transformation, the company's total revenue in the second quarter of 2026 increased by 8% compared to the same period in the previous year.

The company is now focusing specifically on optical network technology, which enables information transmission between various data centers and cloud systems. To strengthen this sector, Justin Hotard, who previously led Intel's data center and AI business, was appointed as the company's CEO last year. As a result of this new approach, a leading chip manufacturing company, Nvidia, invested one billion US dollars a year ago to acquire a 2.9% stake in Nokia. Although Nokia's stock price surged by 20% in a single day with that agreement aimed at product collaboration, a recent report from UBS investment bank indicates that while it succeeded in attracting investor attention, the commercial benefits for Nokia are still unclear.

Looking at the company's history, Nokia is an entity accustomed to constant change. Founded in 1865 as a wood pulp mill near the Nokianvirta River in Finland, it evolved through rubber and cable production before gaining global fame through mobile phones. During the golden age of phone manufacturing, it accounted for about 4% of Finland's Gross Domestic Product (GDP). However, between its peak in March 2000 and 2021, 97% of its capitalization was lost. Nevertheless, with the growth of artificial intelligence, Nokia's stock price rebounded, reaching 14.8 Euros by June, which was its highest value since 2008.

This resurgence with the help of AI technology is not without risks, as indicated by the 37% drop in stock price from its peak in June to date. UBS warns that market instability faced by technology companies could also affect Nokia. This is particularly due to proposals for regulating data centers, which have become a major topic in US election campaigns, as well as new laws introduced by the Spanish government to limit the development of such centers. If major tech companies reduce their investments in AI, Nokia's optical network division, which directly depends on the pace of data center development, will immediately suffer the consequences. The Swiss bank further points out that the latest financial results are disappointing due to a 5% decrease in profit in the network infrastructure division compared to expected levels.

According to Bloomberg data, the majority of analysts hold a positive view on Nokia. 53.3% of them advise buying the company's shares, and 20% recommend holding existing shares. However, institutions like Citi, Barclays, Santander, and Sabadell remain skeptical about this. On the other hand, JP Morgan predicts that the price of a Nokia share will rise to 18 Euros by December 2027. This surpasses the current value of approximately 9 Euros, as well as the market's average expectation of 10.57 Euros. Their view is that the market is responding very slowly to the profit potential from artificial intelligence and cloud technology.

Meanwhile, Nokia, competing very closely with the current leader in the global optical network industry, American Ciena, has succeeded in gaining market share by surpassing smaller competitors. According to Deutsche Bank, due to Ciena's slow nature in expanding its capacities, Nokia is in a more advantageous position to provide the necessary supply chain capabilities to giants like Amazon, Microsoft, or Google. Accordingly, they recommend buying Nokia shares, with a target price of 11.5 Euros.