On Friday, January 12, 2024, Microsoft’s (MSFT.O) market value surpassed that of Apple (AAPL.O) for the first time since 2021, positioning it as the world’s most valuable company. Apple experienced a 0.2% uptick, while Microsoft saw a 1% increase. Consequently, Microsoft’s market capitalization reached a record high of $2.887 trillion, as per LSEG data, outpacing Apple’s $2.875 trillion market capitalization reported on Thursday, January 11, 2024.
Apple has faced a 3% decline in its shares in 2024, primarily attributed to concerns over smartphone demand, following a robust 48% rally in the previous year. In contrast, Microsoft has exhibited a 3% increase year-to-date, building on its 57% surge in 2023, driven partially by its leadership in generative artificial intelligence through an investment in OpenAI, the creator of ChatGPT.
Microsoft’s integration of OpenAI’s technology has bolstered its cloud-computing business, contributing to the company’s impressive performance in the July-September quarter. This AI advantage has positioned Microsoft to challenge Google’s dominance in web search.
Apple, grappling with subdued demand, particularly for its flagship product, the iPhone, has seen a downturn in sales, exacerbated by sluggish recovery in China’s economy and heightened competition from Huawei. The Vision Pro mixed-reality headset, set to launch on Feb. 2, marks Apple’s most significant product introduction since the iPhone in 2007. However, UBS estimates suggest that Vision Pro sales will have a limited impact on Apple’s earnings per share in 2024.
While Microsoft has briefly claimed the title of the most valuable company a few times since 2018, the current shift is reflective of concerns affecting Apple, similar to the dynamics observed in 2021 amid supply chain challenges related to the COVID-19 pandemic.
Both companies’ stock valuations, assessed in terms of price to expected earnings, appear relatively high. Apple’s forward PE stands at 28, surpassing its 10-year average of 19, while Microsoft is trading at around 32 times forward earnings, exceeding its 10-year average of 24, according to LSEG data.
In their upcoming financial reports, analysts anticipate a 0.7% year-on-year revenue increase for Apple, reaching $117.9 billion for the December quarter, marking the company’s first revenue growth in four quarters. On the other hand, Microsoft is expected to report a 16% revenue increase to $61.1 billion, propelled by sustained growth in its cloud business. Apple’s results are scheduled for release on Feb. 1, while Microsoft’s report is imminent in the coming weeks.
(Reuters)
