After a dramatic shift in market fortunes, Microsoft has dethroned Apple as the world’s most valuable company, marking a significant victory in the ongoing tech rivalry. This historic moment, fueled by concerns about Apple’s iPhone demand and Microsoft’s AI dominance, came to pass on Friday, January 12th, 2024.
While Apple’s stock saw a modest increase of 0.2%, Microsoft surged 1%, propelling its market capitalization to a record-breaking $2.887 trillion. Apple, on the other hand, clung to its $2.875 trillion valuation, calculated just a day prior.
The shift in leadership stems from a confluence of factors. Apple’s smartphone sales, the company’s financial backbone, have dipped 3% so far this year after a stellar 48% climb in 2023. Meanwhile, Microsoft’s stock has climbed 3% in 2024, riding the wave of its 57% surge in 2023. This impressive rally was fueled in part by Microsoft’s strategic investment in OpenAI, the masterminds behind the revolutionary ChatGPT language model.
Microsoft has seamlessly integrated OpenAI’s technology into its renowned productivity software suite, sparking a resurgence in its cloud-computing business. This AI edge has also opened a potential path to challenge Google’s longstanding dominance in web search.
While Apple’s upcoming Vision Pro mixed-reality headset launch on February 2nd promises to be a major event, analysts at UBS remain skeptical. They predict that the headset’s impact on Apple’s 2024 earnings will be “relatively immaterial.”
Microsoft’s triumph marks its second time surpassing Apple as the most valuable company since 2018. The previous instance occurred in 2021, triggered by COVID-related supply chain disruptions that impacted iPhone production.
Despite their current valuation, both tech giants appear expensive compared to their expected earnings. Apple’s forward PE ratio, a common valuation metric, currently stands at 28, significantly higher than its 10-year average of 19. Microsoft also trades at a premium, with a forward PE of 32 compared to its historical average of 24.
Apple’s holiday quarter sales forecast, released in November, fell short of Wall Street’s expectations due to weak demand for iPads and wearables. Analysts, on average, predict a meager 0.7% revenue increase for Apple in the December quarter, marking its first year-on-year growth in four quarters. The company is set to release its official results on February 1st.
Meanwhile, Microsoft is expected to report a 16% revenue increase to $61.1 billion in the coming weeks, driven by continued growth in its cloud business.
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