Microsoft Surpasses Apple momentarily
On January 11, Microsoft Surpasses Apple momentarily as the world’s most valuable company for the first time since 2021. The change comes after Apple’s shares saw a sluggish start to the year amid growing concerns. About the demand for its products.
Microsoft shares have surged significantly over the past year, thanks to the company’s proactive approach to generative artificial intelligence. This boost can be attributed to their investment in OpenAI, the creator of ChatGPT. Microsoft shares were up 0.7% on Thursday, giving it a market valuation of $2.865 trillion.
The first trading session saw the stock rise as much as 2%, bringing Microsoft’s market value briefly to $2.903 trillion.
Apple shares fell 0.9%, bringing the company’s market capitalization to $2.871 trillion. The competition for the top spot between Microsoft and Apple has been going on for many years.
D.A. Davidson analyst Gil Luria expressed that Microsoft’s overtaking of Apple was an anticipated outcome, attributing it to Microsoft’s faster growth and greater advantages in the ongoing generative AI revolution.
In the July–September quarter, Microsoft experienced a resurgence in its cloud-computing business, partly attributed to the integration of OpenAI’s technology across its entire suite of productivity software.
Apple is currently facing challenges due to declining demand, particularly for its flagship product the iPhone, which has traditionally been its primary source of revenue. Demand in China, an important market for Apple, has slowed as the country’s economy slowly recovers from the impact of the pandemic. Additionally, competition from a resurgent Huawei is contributing to Apple’s decline in market share.
Redburn Atlantic, in a client note on Wednesday, downgraded Apple shares to “neutral”, citing concerns that China could adversely impact performance in the coming years.
Since the beginning of 2024, three of the 41 analysts covering Apple have revised their ratings downward.
In January, the Cupertino, California-headquartered company experienced a 3.3% decline in contrast to Microsoft, which saw a 1.8% increase as of the latest close.
Both stocks exhibit high share price-to-earnings (PE) ratios, a widely used metric for evaluating the valuations of publicly traded companies.
According to London Stock Exchange Group (LSEG) data, Apple’s forward price-to-earnings (PE) ratio is 28, notably higher than its 10-year average of 19. Meanwhile, Microsoft is currently trading at about 31 times forward earnings, higher than its 10-year average of 24.
On December 14, Apple’s market capitalization reached a peak of $3.081 trillion. However, by the end of the year, the company’s shares had increased by only 48%, less than the 57% increase recorded by Microsoft.
Several times since 2018, MSFT.O has overtaken Apple to become the most valuable company, with one such instance occurring in 2021. The change came amid concerns about COVID-driven supply chain shortages, which hit Apple’s stock price.
Currently, there is optimism about MSFT.O within Wall Street. The company lacks any “Sell” rating, and nearly 90% of brokerages that analyze the company support a Buy recommendation on its stock.
Two-thirds of the analysts covering Apple recommend it as a “Buy”, while the remaining third assign a “Sell” rating, resulting in a balanced assessment with only two “Sell” recommendations.
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