Microsoft has surpassed Apple as the world’s most valuable public company, according to market capitalization data on Thursday. The change comes as Apple shares have stumbled in early 2024 amid concerns over iPhone demand, while Microsoft continues to benefit from momentum in cloud services and artificial intelligence.
After rising 1.6% on Thursday, Microsoft’s market cap reached $2.875 trillion, just ahead of Apple’s $2.871 trillion. Apple shares fell 0.9% on the day, extending the stock’s 2024 decline to 3.3%. It’s the first time since 2021 that Apple’s market valuation has slipped below Microsoft’s.
Analysts attribute Microsoft’s ascendance partly to optimism around the company’s growing presence in generative AI through its partnership with ChatGPT creator OpenAI. Microsoft is seen as an early leader in commercializing this emerging technology, with new AI-powered capabilities introduced across its Office suite and other products.
D.A. Davidson analyst Gil Luria stated that it was inevitable Microsoft would overtake Apple since Microsoft is growing faster and has more potential to benefit from the generative AI revolution.
At the same time, Apple faces building pressure on multiple fronts. The company’s most important product, the iPhone, is showing signs of demand weakness. This was underscored by a series of analyst downgrades in January citing increased competition in crucial markets like China.
Brokerage Redburn Atlantic cautioned clients this week that China could be a drag on Apple’s performance over the coming years. The firm pointed to rivals like a resurgent Huawei and the risk of strained U.S.-China relations impacting Apple’s sales.
Apple’s services segment, a key growth area in recent years, also faces uncertainty as regulators increase scrutiny of its lucrative Google search deal on iOS devices.
While Apple stock surged 48% in 2022, Microsoft shares rose 57%. At its peak valuation in mid-December, Apple’s market cap exceeded $3 trillion. Microsoft’s cap has also briefly eclipsed Apple’s a handful of times since 2018.
Valuation-wise, both tech giants currently look expensive relative to their projected earnings. Apple trades at 28 times forward earnings estimates, well above its 10-year average price-to-earnings ratio of 19. Microsoft’s P/E of 31 is also elevated compared to its 24 average over the past decade.
This shift in market leadership reflects a broader trend as big tech companies realign around AI and cloud computing. Microsoft appears well-positioned to capitalize on growing commercial AI applications. However, Apple retains tremendous brand loyalty and could still surprise with new innovations. The competition between these tech titans will be fascinating to watch in the years ahead.
Wall Street analysts as a group remain more upbeat on Microsoft’s outlook. The stock has no “sell” ratings and nearly 90% of covering analysts rate it a “buy.” Apple has two “sell” calls and a “buy” rating from two-thirds of analysts. Investor sentiment can shift quickly, so both companies need to execute well to justify lofty valuations.
