On January 12, Microsoft (MSFT.O) concluded a trading session with a higher stock market value than Apple (AAPL.O) for the first time since 2021, marking a significant shift in the tech industry landscape. The concerns about iPhone demand weighed on Apple’s shares, allowing Microsoft to seize the top position.
While Apple experienced a marginal 0.2% increase on Friday, Microsoft gained 1%, propelling its market capitalization to a record $2.887 trillion, according to LSEG data. In contrast, Apple’s market capitalization stood at $2.875 trillion, based on data from a filing on Thursday.
The dip in Apple’s shares by 3% in 2024, following a robust 48% surge the previous year, reflects worries about smartphone demand. In contrast, Microsoft has seen a 3% increase year-to-date, building on its impressive 57% surge in 2023, driven partially by its leadership in generative artificial intelligence, thanks to an investment in OpenAI, the creator of ChatGPT.
Apple, whose market capitalization peaked at $3.081 trillion on December 14, according to LSEG, has faced challenges related to tepid demand, particularly for its flagship product, the iPhone. The slowdown in demand in China, a crucial market, has been exacerbated by the slow recovery from the COVID-19 pandemic and increased competition from resurgent companies like Huawei.
Microsoft’s strategic incorporation of OpenAI’s technology into its suite of productivity software has contributed to a resurgence in its cloud-computing business. This move has not only enhanced its artificial intelligence capabilities but has also positioned the company to challenge Google’s dominance in web search.
In comparison, Apple has grappled with sluggish demand, including challenges with the iPhone, its primary revenue driver. The upcoming release of Apple’s Vision Pro mixed-reality headset on February 2 is anticipated to be a significant product launch. However, a recent UBS report suggests that the impact on Apple’s earnings per share in 2024 may be “relatively immaterial.”
Microsoft’s occasional overtaking of Apple as the most valuable company, as seen a few times since 2018, underscores the competitive dynamics in the tech industry. In 2021, supply chain concerns related to the COVID-19 pandemic briefly impacted Apple’s stock price, allowing Microsoft to take the lead.
Both tech giants appear relatively expensive when considering their price-to-earnings ratios. Apple’s forward PE of 28 exceeds 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 the most recent quarterly report in November, Apple provided a sales forecast for the holiday quarter that fell short of Wall Street expectations, reflecting weakened demand for iPads and wearables. Analysts anticipate Microsoft to report a 16% increase in revenue to $61.1 billion, driven by the sustained growth in its cloud business, when it releases its results in the coming weeks.
