Microsoft surpassed Apple as the world’s most valuable company on Thursday, with Apple’s shares experiencing a sluggish start in 2024 due to increasing concerns about demand. Shares of Microsoft, headquartered in Redmond, Washington, rose by 1.6%, reaching a market valuation of $2.875 trillion.
This shift marked the first time since 2021 that Apple’s valuation fell below that of Microsoft, with Cupertino-based Apple being 0.9% lower and holding a market capitalization of $2.871 trillion.
Microsoft’s early advantage in capitalizing on generative artificial intelligence contributed to the positive investor sentiment, while Apple faced a 3.3% decline in its stock in January, compared to Microsoft’s 1.8% rise.
Analyst Gil Luria from DA Davidson stated, “It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution.”
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Apple’s stock decline can be attributed to several rating downgrades, raising concerns about weak iPhone sales, especially in the crucial Chinese market. Redburn Atlantic brokerage noted that competition from Huawei and escalating Sino-US tensions could weigh on Apple’s performance. Additionally, regulatory scrutiny on the Google default search engine deal on iOS poses a threat to Apple’s services business, which had been a bright spot in recent quarters.
While Apple’s market capitalization peaked at $3.081 trillion on Dec. 14, the company ended the previous year with a 48% gain, lower than Microsoft’s 57% rise. Microsoft’s aggressive rollout of genAI-powered tools in collaboration with OpenAI contributed to its robust performance in 2023.
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Microsoft has previously briefly overtaken Apple as the most valuable company, notably in 2021 during concerns about COVID-driven supply chain shortages affecting Apple’s stock price. Currently, Wall Street exhibits a more positive outlook on Microsoft, with no “sell” ratings and almost 90% of brokerages recommending buying the stock. In contrast, Apple has two “sell” ratings, and two-thirds of analysts covering the company rate it as a “buy.”
Both companies are viewed as relatively expensive in terms of their price-to-earnings ratios. Apple’s forward PE is 28, well above its 10-year average of 19, while Microsoft trades around 31 times forward earnings, surpassing its 10-year average of 24, according to LSEG data.
