In a significant market development, Microsoft has secured its position as the world’s most valuable company, outpacing tech giant Apple. The latest data from LSEG reveals that Microsoft’s market capitalization reached an all-time high of $2.887 trillion, while Apple lagged slightly behind at $2.875 trillion, as reported in a filing on Thursday.
This shift in leadership occurred as Microsoft’s stock market value closed a trading session higher than Apple’s for the first time since 2021. The driving force behind this change was concerns impacting Apple’s shares due to weakening demand for its iPhones.
On the recent trading day, Apple experienced a modest 0.2 percent increase, whereas Microsoft saw a 1 percent gain. Consequently, Microsoft’s market capitalization reached its peak at $2.887 trillion, marking a historic high based on LSEG data. In comparison, Apple’s market capitalization was reported at $2.875 trillion, according to data filed on Thursday.
Apple has faced a 3 percent decline in its shares in 2024, attributed to apprehensions about smartphone demand. This comes on the heels of a remarkable 48 percent surge in the previous year. In contrast, Microsoft has shown resilience with a 3 percent increase year-to-date, building on a 57 percent surge in 2023, driven in part by substantial investments in generative artificial intelligence, notably through its partnership with ChatGPT-maker OpenAI.
Notably, Microsoft’s strategic incorporation of OpenAI’s technology across its suite of productivity software has played a pivotal role in revitalizing its cloud-computing business. This move has not only bolstered Microsoft’s position but also created a significant opportunity to challenge Google’s dominance in web search.
Conversely, Apple has been grappling with subdued demand, particularly for its flagship product, the iPhone. The company has encountered challenges in China, a vital market, where demand has dwindled amid the country’s gradual economic recovery from the COVID-19 pandemic, coupled with the resurgence of competitors like Huawei.
Apple’s forthcoming product launch, the Vision Pro mixed-reality headset on February 2 in the United States, is anticipated to be a milestone event. However, UBS analysts predict that Vision Pro sales will have a relatively minor impact on Apple’s earnings per share in 2024.
Microsoft’s occasional overtaking of Apple as the most valuable company has occurred several times since 2018, with the most recent instance in 2021. During that period, concerns about supply chain shortages related to the COVID-19 pandemic impacted Apple’s stock price.
Examining their valuation metrics, both tech giants appear relatively expensive in terms of price-to-earnings ratios. Apple’s forward P/E stands at 28, significantly exceeding its 10-year average of 19, as per LSEG data. Similarly, Microsoft is trading at around 32 times forward earnings, surpassing its 10-year average of 24.
In its latest quarterly report in November, Apple provided a sales forecast for the holiday quarter that fell short of Wall Street expectations. Weak demand for iPads and wearables contributed to this underwhelming projection. Analysts, on average, anticipate a modest 0.7 percent increase in Apple’s revenue to $117.9 billion for the December quarter, marking its first year-on-year revenue growth in four quarters. Apple is scheduled to report its results on February 1.
On the other hand, analysts foresee Microsoft reporting a robust 16 percent increase in revenue to $61.1 billion. This growth is expected to be driven by the continued expansion of its cloud business when Microsoft reports its financial results in the coming weeks.