Microsoft Surpasses Apple as World’s Most Valuable Company

In a surprising turn of events, Microsoft’s stock market value ended a trading session higher than Apple’s for the first time since 2021. This milestone has positioned Microsoft as the world’s most valuable company, while concerns about demand have adversely affected the value of Apple’s shares.

On Friday, Apple saw a modest increase of 0.2 percent, while Microsoft’s stock rose by 1 percent. As a result, Microsoft’s market capitalization reached an all-time high of $2.887 trillion, surpassing Apple’s market capitalization of $2.875 trillion. This data, provided by LSEG, solidifies Microsoft’s position as the current industry leader.

Apple’s Struggles with Demand

The decline in Apple’s stock value can be attributed to concerns over smartphone demand, which have caused a 3 percent drop in shares since the start of 2024. This decline follows a remarkable 48 percent rally in 2023. Apple’s reliance on iPhone sales has presented challenges, particularly due to tepid demand, including in China, one of its key markets. As the country’s economy gradually recovers from the COVID-19 pandemic, Apple faces stiff competition from Huawei, which has eroded its market share.

On the other hand, Microsoft has achieved a steady climb in its stock value, with a 3 percent increase year to date and a remarkable 57 percent surge in 2023. This exceptional growth can be attributed in part to Microsoft’s strategic investment in OpenAI, the creator of ChatGPT. By incorporating OpenAI’s technology into its suite of productivity software, Microsoft has revitalized its cloud-computing business, contributing to its impressive performance in the July-September quarter. Moreover, Microsoft’s investment in generative artificial intelligence has also created an opportunity to challenge Google’s dominance in web search.

Analysts have noted that both Microsoft and Apple appear relatively expensive when considering their expected earnings. Apple is currently trading at a forward price-to-earnings (PE) ratio of 28, significantly higher than its average of 19 over the past decade. Microsoft, on the other hand, is trading around 32 times forward earnings, surpassing its 10-year average of 24. This indicates that investors have high expectations for the future growth of both companies.

Apple’s much-anticipated Vision Pro mixed-reality headset is set to launch on February 2 in the United States. This release marks Apple’s largest product launch since the introduction of the iPhone in 2007. However, a recent UBS report suggests that the sales of Vision Pro will have a relatively minor impact on Apple’s earnings per share in 2024. This assessment highlights the need for long-term sustainability and success beyond individual product launches.

The upcoming earnings reports for both companies are highly anticipated by investors. Analysts predict that Apple will report a modest 0.7 percent increase in revenue to $117.9 billion for the December quarter, signaling its first year-on-year revenue growth in four quarters. Microsoft, on the other hand, is expected to see a 16 percent increase in revenue to $61.1 billion, primarily driven by the continuous growth of its cloud business. These forecasts reflect the high expectations placed on both companies’ abilities to generate substantial revenue and sustain their market leadership.

The recent shift in market value, with Microsoft surpassing Apple as the world’s most valuable company, highlights the dynamic nature of the technology industry. As Apple faces challenges in meeting demand and maintaining its market share, Microsoft’s strategic investments in AI and cloud computing have propelled it to the forefront. Nevertheless, the future performance of both companies hinges on their ability to adapt to evolving market trends, meet customer demands, and continue delivering innovative products and services. Only time will reveal whether Microsoft’s rise in market value is a temporary milestone or a more enduring shift in the industry hierarchy.


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