Microsoft surpassed Apple as the world's most valuable company on Thursday, driven by Apple's weak start in 2024 amid concerns over demand for its products. Microsoft's market valuation reached $2.875 trillion with a 1.6% increase, fueled by its early lead in capitalizing on generative artificial intelligence. Apple, facing a 0.9% dip, now holds a market capitalization of $2.871 trillion, marking the first time since 2021 that it has fallen below Microsoft.
Microsoft's growth, particularly in generative AI, played a crucial role in overtaking Apple, according to D.A. Davidson analyst Gil Luria. Apple's stock declined by 3.3% in January, contrasted with Microsoft's 1.8% rise, as concerns over iPhone sales, especially in China, grew due to competition from Huawei and escalating Sino-U.S. tensions. Rating downgrades contributed to Apple's stock weakness, with concerns about iPhone sales and regulatory scrutiny on the default search engine deal with Google.
Despite Apple's market capitalization peaking at $3.081 trillion in December 2023, it ended the year with a 48% gain, less than Microsoft's 57% rise, driven by the latter's aggressive rollout of genAI-powered tools in collaboration with OpenAI.
Microsoft previously led in market valuation over Apple in 2021 amid COVID-related supply chain concerns. Currently, Wall Street favors Microsoft, with no "sell" ratings and nearly 90% of brokerages recommending the stock. In contrast, Apple has two "sell" ratings, and only two-thirds of analysts rate it as a "buy." Both companies appear relatively expensive in terms of their price-to-earnings ratios compared to their historical averages. Apple's forward PE is at 28, exceeding its 10-year average of 19, while Microsoft trades at around 31 times forward earnings, surpassing its 10-year average of 24, according to LSEG data.
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