Why is $NOK considered the "cheapest optical stock" in the AI wave?

Nokia is gradually shedding its image as the “king of flip phones” to enter the AI infrastructure game – where fiber optic bandwidth, data centers, and core networks become the backbone of the entire new era. But the most notable thing is not the story of transformation, but that valuation is still lagging behind the market.

1. Valuation Landscape: Nokia Is the “Cheapest Outlier” Among fiber infrastructure – AI stocks, current valuations are clearly diverging: AAOI: ~55x forward P/E (growth speculation) LITE: ~66.5x forward P/E (premium due to AI ecosystem involvement) COHR: ~34x forward P/E (partially reflecting expectations) NOK: ~30x forward P/E (lowest in the group) The paradox lies in the fact that: Nokia’s AI and cloud growth rates are not inferior to competitors, yet it is valued like a traditional telecom company.

2. Nokia Is No Longer the Old Nokia Recent business figures show a clear structural change: Q1/2026 revenue around $5 billion EPS up ~67% YoY Revenue from AI & cloud up ~49% Optical segment up ~20% Gross profit margin expanded to ~45% Free cash flow increased ~40% New AI & cloud orders ~1 billion USD in just one quarter If these numbers appeared in a “pure AI infrastructure” company in the US, the market might have already revalued it long ago. But with Nokia, the story is still overshadowed by its telecom past.

3. Three Strategic Changes the Market Has Not Fully Valued (1) Confirmation from Nvidia NVIDIA invested directly $1 billion in Nokia at a purchase price of ~6.01 USD/share. This is not just a tech partnership, but a form of “market capitalization signal”: the leader in AI infrastructure is putting real money into the optical supply chain.

(2) Expanding capabilities through M&A The acquisition of Infinera helps Nokia shift from a device supplier to a model: “from chip → optical components → complete network systems” This creates a structure almost impossible to copy in the optical industry, where most competitors only hold part of the value chain.

(3) A CEO with an AI mindset, no longer just telecom New CEO Justin Hotard comes from Intel’s AI division. This is important because it changes: strategic priorities R&D allocation and repositioning Nokia within the AI infrastructure ecosystem Notable message: “a milestone related to Nvidia will appear this year” – but the market has yet to react strongly.

4. Technological Edge: The Scale-Out Game In AI data centers, there are two expansion directions: Scale-up (within the same rack – mainly using copper) Scale-out (between racks/data centers – requiring optical) Nokia is focusing on the second layer – where physical limits become the decisive factor. Nokia’s PSE-6s technology allows: 800G optical transmission → aiming for 1.2T optimized for long-distance connections between AI data centers This makes Nokia one of the very few companies controlling the “physical backbone” of AI networking.

5. Technical Picture: Is the Uptrend Still Unfinished? Long-term indicators show: Monthly RSI in high zone (~80+) MACD trending upward and crossing above zero momentum remains strong after breaking a multi-year downtrend This often appears in cycles: “long-term breakout → multiple wave increases” However, short-term overbought conditions also suggest a high likelihood of volatility.

6. Valuation Puzzle: The Market Might Be Off Nokia’s leadership targets EPS ~0.50 USD by 2028. Applying industry valuation multiples: 40–50x EPS → fair value could be ~$20–25/share while current is around ~$13 Key point: the market is valuing Nokia based on the “telecom past,” not the “AI infrastructure future.”

7. Unavoidable Risks Despite the compelling story, certain factors need monitoring: Traditional telecom segment still pressures profits Telecom capex cycles are unstable Delays in AI expectations could cause sharp corrections Short-term technical conditions are overheated

Conclusion Nokia stands at the crossroads of two worlds: the past: low-value telecom equipment the future: optical infrastructure for global AI The unusual point is not the growth story itself, but the gap between growth and valuation. If AI is a “super cycle of infrastructure,” then optics are the physical foundation of the entire system. And Nokia – as the market currently values it – has not yet been properly recognized for this role.