Nokia is Morgan Stanley’s ‘top pick’ when it comes to Europe and light-related matters, as copper’s capabilities are insufficient.
Investing.com – European semiconductor stocks are quietly positioning themselves at the heart of the AI infrastructure buildout, not through chips, but through light. A new Morgan Stanley report argues that optics is emerging as the critical bottleneck in AI datacenters, as explosive demand for connectivity outpaces what copper-based systems can physically deliver.
With a forecast ~40% CAGR for Europe’s addressable optical market through 2028, the brokerage sees a multi-year growth cycle that the market has yet to fully price in.
Nokia is the brokerage’s top pick, and the bull case is straightforward: management’s own revenue growth guidance for its Optical and IP division of 10-12% looks too conservative.
Morgan Stanley sits at 13%, with optical alone growing above 20%, driven by hyperscaler demand. Potential new partnerships beyond existing Microsoft and NVIDIA agreements could be a further catalyst. The stock is rated “overweight” with a €8.50 price target implying 16% upside.