Nokia's 140% rally turns AI comeback into valuation puzzle

A rally in Nokia Oyj is forcing investors to reconsider the company not as an old telecom-equipment stock, but as part of the infrastructure underpinning the artificial intelligence (AI) boom.

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Around the world, developers are now focusing on increasing profits, acquiring land in a calibrated manner and reducing debt.

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Shares of the Finnish company have surged more than 140% this year, making it the fourth-best performer in the Stoxx Europe 600. The stock is at the highest levels since 2008, thanks to soaring demand for its optical equipment that's playing a bigger role in data centres.

The rally transformed how the market values the stock. Its 12-month forward price-to-earnings ratio more than doubled to 36 times, from roughly 17 times at the year's start. Yet the AI and cloud business behind much of the excitement accounted for just 8% of group sales in the first quarter, underscoring the debate over how much future growth investors should price in today.