The corporate landscape has been witnessing an intense battle between two titans of technology – Microsoft (MSFT) and Apple (AAPL). Recently, in a dramatic shift, Microsoft has overtaken Apple regarding market capitalization, marking a significant moment in this ongoing rivalry. The fluctuating Apple stock price and AAPL stock valuations have been a subject of keen interest to investors and market analysts alike. As of early 2024, Microsoft’s market cap soared to $2.89 trillion, marginally edging Apple’s $2.87 trillion.
This development is particularly notable considering the long-standing dominance of Apple in the market cap race. Apple has been a front-runner for years, setting benchmarks with its innovative products and strong consumer presence. However, the recent change underscores the dynamic and competitive nature of the tech industry, where strategic initiatives and market trends can significantly alter the landscape. Now, with this blog, let us break down the numbers that have affected the ongoing battle between Microsoft and Apple.
Microsoft’s Ascendancy
Microsoft’s recent surge to the top is not an overnight phenomenon. It’s the result of the company’s strategic focus on generative artificial intelligence (AI) and a deep investment in OpenAI, the makers of ChatGPT. This focus on AI has been instrumental in driving Microsoft’s growth, enhancing its product offerings, and consequently boosting its market valuation. The company’s stock price increased, indicating robust investor confidence and market performance.
Some analysts believe that Microsoft can overtake Apple as the highest-valued company in the world. To support this belief further, Huntington Private Bank said that Microsoft offers more of what the market currently needs. The bank also said that it has faith in Microsoft’s margins because cloud and AI are two areas that can expect more growth in the coming years, and isn’t sure if the iPhone can do the same.
Analysts also favor Microsoft because of its recommendation consensus; its ratio of buy, hold and sell ratings stand well above Apple’s. Around 90% of Microsoft analysts recommend buying its stock. The company expects double-digit growth in its revenue and net earnings for every share in fiscal 2024. Furthermore, in the next three years, Microsoft is expected to grow even more due to its cloud business and ChatGPT, the fastest-growing OpenAI startup.
Apple’s Challenges
Currently, Apple stands at nearly $2.8 trillion, a downfall from its $3.1 trillion valuation. Apple has seen a decline in the prices of its shares, whereas Microsoft has seen a steady rise.
This share of challenges, impacting its stock performance and market cap, can be attributed to various reasons. A slowdown in iPhone demand and growing competition, particularly in key markets like China, have pressured Apple’s market position. Analysts are favoring Microsoft over Apple; only 65% of the Analysts recommend buying Apple’s stocks.
With AI becoming seen as the hottest investment theme for people, Apple could slip into fourth place among US stocks. Bernstein said Apple has started “looking the like the old IBM.” Rosenblatt Securities noted that Apple’s position as the highest-valued company could also be threatened by Nvidia, one of the biggest beneficiaries of the AI boom.
Despite these challenges, Apple remains a potent force in the tech industry, with a strong product lineup and a loyal consumer base. According to the Bloomberg data, Apple is expected to have positive revenue growth in fiscal 2024 and continue growing for the next two years. However, it will still not be as robust as that of Microsoft.
Wall Street’s Perspective
Since Apple and Microsoft jumped into a tight race to claim the top spot as the most valuable publicly traded company, with only a 3-4% difference in their valuation, things haven’t been looking good for Apple. However, the situation improved when one of Wall Street’s largest broker-dealers joined the conversation.
Wall Street’s reaction to this shift has been mixed. Analysts acknowledge Microsoft’s growing influence, particularly in AI, and its potential for future growth. In contrast, Apple’s current challenges and the potential for limited growth in iPhone sales have caused some analysts to adopt a more cautious stance on the company’s future performance.
But, if sides were to be picked, it has been said that Wall Street is more optimistic about Microsoft. Near about 90% of the brokerages covering the company are in support of people buying Microsoft. Apple only has about two “sell ratings,” and only about two-thirds of the analysts recommend buying the stocks.
Conclusion
The race for market cap dominance between Microsoft and Apple is a fascinating aspect of the tech industry, reflecting broader market trends and corporate strategies. As both companies continue to innovate and adapt, their battle for the top spot remains a critical point of interest for investors, industry observers, and tech enthusiasts. The evolving nature of this rivalry underscores the importance of strategic foresight and adaptability in maintaining market leadership.