In a surprising turn of events, Microsoft (MSFT.O) temporarily surpassed Apple (AAPL.O) as the world’s most valuable company on Thursday, marking the first time since 2021. The shift in rankings was fueled by concerns over Apple’s weaker-than-expected start to the year and growing doubts about iPhone demand.
Microsoft’s shares, buoyed by a substantial rise since the previous year, closed 0.5% higher, resulting in a market valuation of $2.859 trillion. At its peak during the session, Microsoft briefly reached a staggering $2.903 trillion. On the other hand, Apple’s shares closed 0.3% lower, leading to a market capitalization of $2.886 trillion. The historic rivalry between Microsoft and Apple has seen frequent fluctuations in the race for the top spot.
Analysts attribute Microsoft’s recent success to its rapid growth and strategic investments in generative artificial intelligence, particularly through its collaboration with OpenAI, the creator of ChatGPT. D.A. Davidson analyst Gil Luria noted, “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 contributed to a significant rebound in its cloud-computing business during the July-September quarter. Meanwhile, Apple faced challenges with weakening demand, especially for its flagship product, the iPhone, in key markets like China.
Concerns about Apple’s performance in China, where economic recovery from the pandemic has been slow and competition from Huawei remains formidable, led brokerage Redburn Atlantic to downgrade Apple’s shares to “neutral.” At least three analysts covering Apple have lowered their ratings since the beginning of 2024.
While both Microsoft and Apple boast high market valuations, their stock prices are considered expensive in terms of the price-to-earnings (PE) ratio. Apple, trading at a forward PE of 28, significantly exceeds its 10-year average of 19, according to LSEG data. Microsoft, with a forward PE of around 31, also surpasses its 10-year average of 24.
Microsoft’s recent success in overtaking Apple aligns with its positive reception on Wall Street. The company has not received any “sell” ratings, and nearly 90% of brokerages covering Microsoft recommend buying the stock. In contrast, Apple has received two “sell” ratings, with only two-thirds of analysts rating it as a “buy.”
