Microsoft briefly surpassed Apple as the world’s most valuable company on Thursday for the first time since 2021, after the iPhone maker’s shares fell sharply early in the year amid growing concerns about demand.
Microsoft’s stock has risen sharply since last year, thanks to the company’s early entry into generative artificial intelligence with an investment in ChatGPT maker OpenAI.
Microsoft’s stock closed 0.5% higher, with a market value of $2.859 trillion. It rose up to 2% during the session, and the company was briefly valued at $2.903 trillion.
Apple shares closed 0.3% lower, with a market capitalization of $2.886 trillion. Microsoft and Apple have competed for the top spot over the years.
“It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution,” said D.A. Davidson analyst Gil Luria.
Analysts covering Apple have downgraded the ratings since the beginning of 2024
Microsoft has integrated OpenAI technology into its suite of productivity software, resulting in a rebound in its cloud computing business in the July–September quarter.
In the meantime, Apple has been dealing with declining demand, particularly for the iPhone, its most profitable product. Demand in China, a major market, has fallen as the country’s economy slowly recovers from the pandemic and a resurgent Huawei eats into its market share.
“China could be a drag on performance over the coming years,” brokerage Redburn Atlantic said in a client note on Wednesday, downgrading Apple’s shares to “neutral”.
At least three of the 41 analysts covering Apple have downgraded their ratings since the beginning of 2024.
As of the most recent close, Apple’s shares had fallen 3.3% in January, while Microsoft’s had risen 1.8%.
Both stocks are expensive in terms of the share price-to-earnings (PE) ratio, which is a popular method for valuing publicly traded companies.
Microsoft has briefly surpassed Apple as the most valuable company several times since 2018
According to LSEG data, Apple is trading at a forward PE of 28, which is significantly higher than the previous 10-year average of 19.
Microsoft is trading at around 31 times forward earnings, up from its 10-year average of 24.
Apple’s market capitalization peaked at $3.081 trillion on December 14 and ended the year up 48%. Microsoft reported a 57% increase, which was higher.
Microsoft has briefly surpassed Apple as the most valuable company several times since 2018, including in 2021, when concerns about COVID-related supply chain shortages impacted the iPhone maker’s stock price.
Currently, Wall Street is more optimistic about Microsoft. The company does not have a “sell” rating, and nearly 90% of brokerages covering the company recommend buying the stock.
Apple has two “sell” ratings, and only two-thirds of analysts covering the company rate it as a “buy”.