For a brief moment, Microsoft (MSFT.O) managed to surpass Apple (AAPL.O) as the world’s most valuable company. This happened due to Apple’s shares experiencing a sluggish start to the year, which raised concerns about demand.
Microsoft’s shares have experienced a significant increase since last year thanks to the company’s groundbreaking efforts in generative artificial intelligence. This success can be attributed to their strategic investment in OpenAI, the creator of ChatGPT.
Microsoft’s stock ended the day with a 0.5% increase, resulting in a market valuation of $2.859 trillion. It experienced a 2% increase during the session, and the company’s value briefly reached $2.903 trillion.
Apple’s shares ended the day with a slight 0.3% decrease, resulting in a market capitalization of $2.886 trillion. Microsoft and Apple are in constant competition for the leading position throughout the years.
Gil Luria, an expert at D.A. Davidson, said, “It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution,”
Microsoft’s integration of OpenAI’s technology into its suite of productivity software played a significant role in revitalizing its cloud-computing business during the July-September quarter.
On the other hand, Apple has been dealing with a decline in demand, particularly for the iPhone, its most profitable product. In China, a significant market, demand has decreased due to the country’s slow economic recovery from the pandemic and the increasing competition from Huawei.
According to a client note from brokerage Redburn Atlantic on Wednesday, Apple’s shares have been downgraded to “neutral” due to concerns about China potentially impacting performance in the coming years.
Since the beginning of 2024, several analysts covering Apple have revised their ratings downwards. Apple’s stock has experienced a 3.3% decline in January, while Microsoft’s stock has seen a 1.8% increase.
The conventional way to value publicly listed firms is by looking at their share price to earnings (PE) ratio, and both stocks are pricey by that measure. According to LSEG data, Apple’s forward PE ratio is currently 28, which is significantly higher than its 10-year average of 19.
Microsoft’s current trading multiple of 31 times forward earnings is higher than its 10-year average of 24. Apple’s market capitalization reached a staggering $3.081 trillion on Dec. 14, and the company closed out the year with an impressive 48% gain. That increase was less than the 57% surge reported by Microsoft.
On several occasions since 2018, Microsoft has temporarily surpassed Apple as the top-valued company. This happened again in 2021 due to concerns about supply chain disruptions caused by COVID-19, which affected Apple’s stock price.
At present, Wall Street has a favorable outlook on Microsoft. The company has a favorable rating and is highly recommended by almost 90% of the brokerages covering it. Apple has two “sell” ratings, and only two-thirds of analysts covering the business rate it a “buy.”
