Rosenblatt Initiates Nokia at 'Buy' on Undervalued AI Optical Business

Rosenblatt has initiated coverage on Nokia (NOK) with a Buy rating, arguing that the company’s optical networking division is a significantly undervalued beneficiary of the artificial intelligence infrastructure boom. The firm set a $15 price target, citing a potential re-rating as the market recognizes its AI-driven growth while the stock still trades at a traditional telecom-equipment valuation.

The AI Optical Thesis

In a note published on September 15, 2026, Rosenblatt analyst Mike Genovese stated that Nokia's Network Infrastructure segment "is quietly becoming one of the best-positioned Optical assets in the AI buildout." This view is supported by recent performance, as the company's Optical Networks revenue grew 20% year-over-year in the second quarter of 2026.

Key growth indicators from the report include:

• AI and Cloud revenue more than doubled in the second quarter.
• AI and Cloud orders reached €2.8 billion in the same period.
• Nokia has gained significant share in "scale-across" networking, a critical fabric in AI data centers.

To secure its supply chain for leading-edge optical components, Nokia is investing in three U.S.-based Indium Phosphide laser facilities, according to the note.

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Market Opportunity and Valuation

Rosenblatt estimates the broader Optical Data Center Interconnect (DCI) market, currently valued at around $12 billion, could expand at a compound annual rate of approximately 35% to reach $40 billion to $50 billion by 2030. The firm noted that Nokia's trailing twelve-month Optical Networks sales of about $4 billion are roughly in line with competitor Ciena, positioning both as market leaders.

The firm's $15 price target is derived from a sum-of-the-parts analysis that attributes one-third of Nokia's value to its AI infrastructure business and two-thirds to its traditional telecom operations. Genovese called this valuation "potentially conservative," given expectations that the revenue mix will shift further toward AI over time.

Outlook for Core Business

While the AI optical business is the core of the bull case, Rosenblatt views Nokia's other major segments, Fixed Networks and Mobile Infrastructure, as low-single-digit growth businesses being managed for margin improvement. The firm projects Nokia's overall operating margins could rise to above 15% by 2028, up from 11.5% in 2026, aided by factors including AI-RAN adoption and cost-reduction actions.