Microsoft is the world market leader

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Key points:

  • Microsoft has overtaken Apple in market capitalization, becoming the most valuable company in the world.
  • The reason for this was the growth of Microsoft’s business in cloud computing and artificial intelligence.
  • Apple, on the other hand, has faced declining demand, including for its flagship product, the iPhone.

On Friday, Microsoft surpassed Apple to become the world’s most valuable company, as concerns over waning demand for smartphones weighed on Apple’s stock price.

Apple shares edged up by 0.2% on Friday, while Microsoft’s stock gained 1%. Microsoft’s market capitalization reached an all-time high of $2.887 trillion, as per LSEG data. In contrast, Apple’s market cap stood at $2.875 trillion, according to Thursday’s data.

Persistent worries about smartphone demand have caused Apple’s shares to decline by 3% in 2024, after a remarkable 48% surge in the previous year. Microsoft, on the other hand, has seen its shares appreciate by about 3% so far in 2024, extending its 57% growth trajectory from 2023.

Reasons for Microsoft’s success

Microsoft has infused its productivity software suite with OpenAI technology, contributing to a revival of its cloud computing business in the third quarter.

The tech behemoth, which has consistently emphasized artificial intelligence alongside Nvidia and Amazon, has experienced substantial market expansion over the past year. Notably, Microsoft’s market capitalization has surpassed $1 trillion.

Analysts draw parallels between this metamorphosis and the early 2000s, when technology and Internet companies rose to prominence, supplanting consumer and financial firms as market leaders.

Challenges for Apple

Apple, on the contrary, is experiencing dwindling demand, including for its iconic product, the iPhone.

The company is particularly facing difficulties in China, a critical market where the economic recovery from the pandemic is slow and competition from a resurgent Huawei is escalating, eroding its market share.

Other AI-driven technology companies like Nvidia, Meta Platforms, and Alphabet have also witnessed their market capitalizations skyrocket significantly in the past year. The Apple Vision Pro mixed reality headset will be available for purchase in the United States on February 2, marking Apple’s most significant product launch since the iPhone in 2007. However, UBS predicted in a recent report that Vision Pro sales will have a “negligible” impact on Apple’s earnings per share in 2024.

Competition between the companies

Microsoft has temporarily surpassed Apple as the most valuable company several times since 2018, most notably in 2021 when worries about pandemic-related supply chain disruptions impacted the iPhone maker’s stock price. Both technology stocks appear significantly overvalued from a price-to-earnings standpoint.

Analysts predict that Apple’s December-quarter revenue will increase by 0.7% to $117.9 billion, marking the first year-over-year increase in four quarters, according to LSEG. Apple will unveil its financial results on February 1.

Analysts anticipate that Microsoft will report a 16% increase in revenue to $61.1 billion, aided by sustained growth in its cloud business, when the company releases its financials in the coming weeks.


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