Microsoft’s market value surpassed Apple’s in the latest trading session, marking the first time since 2021 that it became the world’s most valuable company.
On Friday, Apple’s stock edged up by 0.2%, while Microsoft experienced a 1% increase. This propelled Microsoft’s market capitalization to a record high of $2.887 trillion, according to LSEG data, surpassing Apple’s $2.875 trillion, reported in a filing on Thursday.
The shift in market dynamics can be attributed to concerns about smartphone demand, which have impacted Apple’s shares, causing a 3% decline in 2024 after a notable 48% surge in the previous year.
In contrast, Microsoft has seen a 3% increase year-to-date, building on a 57% rally in 2023, driven in part by its leadership in generative artificial intelligence, thanks to its investment in OpenAI, the creator of ChatGPT.
Microsoft’s integration of OpenAI’s technology into its suite of productivity software has contributed to a rebound in its cloud-computing business, particularly evident in the July-September quarter. This artificial intelligence advantage has positioned Microsoft to challenge Google’s dominance in web search.
On the other hand, Apple has faced challenges related to subdued demand, particularly for its flagship product, the iPhone. Slow economic recovery and resurgent competition from Huawei in China, a crucial market for Apple, have contributed to a 3% decline in its shares this year. Apple’s market capitalization peaked at $3.081 trillion on Dec. 14, according to LSEG.
Microsoft’s strategic use of OpenAI’s technology has not only boosted its cloud business but has also provided leverage in the technology landscape. Meanwhile, Apple is preparing for the launch of its Vision Pro mixed-reality headset on Feb. 2 in the United States, representing its most significant product launch since the iPhone in 2007. However, analysts project that Vision Pro sales will have a limited impact on Apple’s earnings per share in 2024.
While Microsoft has briefly surpassed Apple in market value several times since 2018, the recent shift is reflective of concerns about Apple’s supply chain and the impact of the COVID-19 pandemic on its stock price in 2021.
Both tech giants appear relatively expensive in terms of price to expected earnings. Apple’s forward PE is 28, significantly above its 10-year average of 19, while Microsoft is trading at around 32 times forward earnings, surpassing its 10-year average of 24, according to LSEG data.
In their upcoming financial reports, analysts expect Apple to post a modest revenue increase of 0.7% to $117.9 billion for the December quarter, marking its first year-on-year revenue growth in four quarters.
In comparison, Microsoft is anticipated to report a robust 16% increase in revenue to $61.1 billion, driven by sustained growth in its cloud business. Apple is scheduled to release its results on Feb. 1, while Microsoft is expected to do the same in the coming weeks.