Microsoft Surpasses Apple and Becomes the Most Valuable Company in the World

Microsoft’s market value ended the day on the stock exchange with a price higher than Apple’s on Friday for the first time since 2021, making it the most valuable company in the world as concerns over demand have knocked down the shares of the iPhone maker.

Apple rose by 0.2 percent on Friday, while Microsoft increased by one percent. This brought Microsoft’s market capitalization to $2.887 trillion, the highest ever, according to LSEG data. Apple’s market capitalization was $2.875 trillion, calculated based on data from a filing on Thursday, Reuters reported.

Concerns about smartphone demand have caused Apple’s shares to drop by three percent so far in 2024 after rising by 48 percent last year. Microsoft has increased by about three percent to date, after rising by 57 percent in 2023, partly due to its leading role in generative artificial intelligence through its investment in OpenAI, the maker of ChatGPT.

Apple’s market capitalization peaked at $3.081 trillion on December 14, according to LSEG.

Microsoft has incorporated OpenAI technology into its productivity software suite, a move that helped boost the recovery of its cloud computing business in the third quarter of last year. Its leadership in AI has also created an opportunity to question Google’s dominance in web search.

Meanwhile, Apple is struggling with somewhat weaker demand, including for the iPhone, its best-selling product. Demand in China, a major market, has declined as the local economy slowly recovers from the COVID-19 pandemic, and Huawei is reducing its market share.

We remind you that sales of Apple’s mixed reality headset, Vision Pro , begin on February 2 in the U.S., marking Apple’s largest product launch since the iPhone in 2007. However, UBS estimated in a report this week that Vision Pro sales will be ‘relatively insignificant’ to Apple’s earnings per share in 2024.

Several times since 2018, Microsoft has briefly taken the lead over Apple as the most valuable company, most recently in 2021, when concerns over supply chain shortages related to the COVID-19 pandemic hit the iPhone maker’s stock price.

Both tech stocks appear relatively expensive compared to their expected earnings, which is a common method of valuing publicly traded companies. According to LSEG data, Apple trades with a forward PE (price to earnings ratio) of 28, significantly above the average of 19 over the past ten years. Microsoft trades at about 32 times earnings, which is above its ten-year average of 24.

In its latest quarterly report in November, Apple provided a sales forecast for the holiday quarter that missed Wall Street expectations, hurt by weak demand for iPads and wearables.

According to LSEG, analysts on average see Apple’s revenue growing by 0.7 percent to $117.9 billion in the December quarter. This would mark the first year-over-year revenue increase in four quarters. Apple will report its results on February 1.

Analysts believe Microsoft reported a 16 percent increase in revenue to $61.1 billion, driven by continued growth in its cloud business when it reports in the coming weeks.