Investing.com -- Morgan Stanley upgraded Nokia Oyj to "overweight" from "equal-weight" rating and raised its price target to €6.50 from €4.20, citing increased exposure to data center and AI-driven network demand, in a note dated Thursday, sending the shares up higher.
The stock was also added to the firm's Top Pick list. The upgrade follows what Morgan Stanley described as several years of restructuring and portfolio simplification that have left Nokia as a leaner company with greater exposure to network infrastructure tied to data center construction.
The brokerage said Nokia's revenue mix has shifted following the acquisition of Infinera, which closed in February 2025.
Revenues from AI and Cloud now account for about 6% of group revenues and have been increasing by about 1 percentage point each quarter.
Morgan Stanley said the addressable market for these activities is growing at more than 15% per year, supported by rising capital spending from hyperscalers, which it noted are investing more each quarter than the largest telecom operators invest in a full year.
Morgan Stanley highlighted strong demand in optical networks as a central factor behind the upgrade.
The analysts said Nokia's optical network unit benefits from data center construction by providing connectivity between and within data centers.
Order momentum was described as strong year over year, with optical networking orders up more than 40% and data center switching orders up more than 150%. The firm said this trend supports near-term revenue growth and underpins expectations for continued growth over the medium to long term.
The upgrade also reflected Morgan Stanley's view that Nokia's earnings outlook is stronger than reflected in consensus estimates.
The brokerage said its 2028 EBIT forecast is more than 10% above consensus. While acknowledging that AI and Cloud revenues remain a relatively small portion of total sales, the report said their growth is being driven by the data center construction boom.
Morgan Stanley added that valuation levels remain similar to historical averages during previous technology cycles, at about 9 times EBIT, and said this does not fully reflect Nokia's increased exposure to AI-related network demand.
In addition, the report noted signs of stabilization in other parts of the business after several years of decline.
Morgan Stanley said mobile networks revenues could stabilize as the loss of more than €500 million per year in AT&T-related revenues washes out, and it pointed to a rebound in cloud and network services following cost restructuring and improved demand for standalone 5G.