Key Takeaways:
- Microsoft stocks end Friday’s trading session higher than Apple, becoming the world’s most valuable company in the process for the first time in over two years
- The Seattle-based tech giant’s market capitalization currently stands at $2.88 trillion while Apple has a total valuation of $2.87 trillion
- Wall Street analysts expect Microsoft’s share price to grow 8% in 2024 as it continues to develop and integrate AI technology into its various products and services
On Friday, January 13, Microsoft beat Apple to become the world’s most valuable publicly traded company after its stocks ended a trading session higher than the iPhone maker for the first time since November 2021, over two years ago.
Microsoft Tips Apple To Become The Most Valuable Company In The World After 2 Years
According to data from LSEG, Microsoft shares rose 1% to $388.47 on Friday, which crept up its market capitalization to $2.887 trillion. Meanwhile, Apple gained 0.2%, closing the day with a market capitalization of $2.875 trillion.
Apple’s slow growth can be attributed to diminishing demand for smartphones, especially the iPhone, which is the company’s biggest cash cow.
While both are part of the Magnificent 7 tech stocks – which includes Amazon, Alphabet, Tesla, Nvidia, and Meta – and enjoyed a powerful rally last year, their fortunes have diverged in 2024.
Microsoft has been up about 3.3% on a year-to-date basis after surging 57% in 2023, which was largely driven by the tech giant’s optimism over artificial intelligence that was cemented with its $13 billion investment ChatGPT founder OpenAI.
Whereas, Apple’s shares have dropped 3% so far this year after rallying 48% in 2023. There have been concerns about the Cupertino-based firm’s growth ever since its market capitalization peaked at $3.08 trillion in December. Moreover, Apple has been hit by at least three analyst rating downgrades, according to data compiled by Bloomberg.
Microsoft Expected To Grow By 8% in 2024 After Its Successful Bet On AI Technology
Furthermore, Wall Street analysts have a favorable view of Microsoft and expect the company to maintain or even build on its fresh advantage. The average price target over the next 12 months for the Seattle-headquartered tech firm is north of 8%, placing it slightly above the valuation for Apple.
If the prediction turns out to be true, Microsoft could top the $3 trillion mark, joining Apple as one of the only two publicly traded companies to hit the threshold.
Microsoft’s surge is not surprising as the company banked heavily on the widely popular generative AI technology. The software firm even incorporated much of OpenAI’s technology across its suite of productive applications and operative systems over the past year, which helped spark a rebound in its cloud-computing business during the third quarter.
Microsoft is also targeting Google’s dominance in the internet search engine market by creating a new niche that incorporates AI into search.
Apple Shares Tumble Due To Diminishing Demand For iPhones, iPads, And Wearables
At the same time, things are looking bleak for Apple as it continues to grapple with timid demand for iPhones. Demand in China, one of its major markets, has slumped as the country slowly recovers from the economic crisis created by the COVID-19 pandemic. Additionally, Chinese tech giant Huawei has reemerged as a major competitor for Apple and has eroded its market share in the world’s second-largest economy.
David Katz, chief investment officer at Matrix Asset Advisors, said that growth at Apple was “showing nothing special”, whereas Microsoft had done a better job of “executing and demonstrating” earnings growth. He highlighted that Microsoft has a “much clearer roadmap with AI” and has done a great job articulating how it will accelerate growth “to make its long-term prospects even more compelling”.
Apple’s highly-anticipated Vision Pro mixed-reality headset is expected to begin sales in the US on February 2, marking the company’s biggest product launch since the iPhone in 2007. However, UBS said earlier this week that the Vision Pro’s sales would not have a big impact on Apple’s earnings per share in 2024.
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Apple And Microsoft Expected To Have Diverging Fortunes In 2024
LSEG says that analysts think Apple will make a total of $117.9 billion in the fourth quarter of 2023, which is a 0.7% increase in sales. Interestingly, this would be the first year-on-year revenue increase for the company for four quarters running.
Apple’s Q3 earnings report in November had given a sales forecast that missed Wall Street’s expectations as demand for iPads and the Apple Watch waned. This was also not helped by the prospect of Apple Watch Series 9 being potentially banned in the US due to a patent infringement claim.
On the other hand, Microsoft is expected to report an impressive 16% revenue rise in Q4 to $61.1 billion, led by the ongoing growth in its cloud computing business.
The last time Microsoft took the mantle from Apple as the world’s most valuable company was in 2021 when a pandemic-related supply-chain crisis hit the iPhone and Mac maker’s stock prices.
Microsoft and Apple remain the biggest stocks in the S&P 500, accounting for roughly 14% of the entire index. When it comes to sheer size, there are only a handful of companies out there that could come anywhere close.
Saudi oil giant Aramco sits at just over $2 trillion, while Google’s parent company Alphabet, Facebook’s Meta, and chip manufacturing giant Nvidia sit right below the coveted trillion dollar mark.
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