Microsoft overtakes Apple to become the world’s most valuable company amid concerns about smartphone demand

For the first time since 2021, Microsoft surpassed Apple to become the most valuable corporation in the world on Friday

Fears about demand hurt Apple’s shares on Friday, but Microsoft’s stock market valuation ended a trading day greater than Apple’s for the first time since 2021, making it the most valuable corporation in the world.

Microsoft climbed one percent on Friday, while Apple barely increased by 0.2 percent. As a result, according to LSEG data, Microsoft’s market capitalization reached its greatest level ever, reaching $2.887 trillion (about Rs. 2,39,26,500 crore). Apple’s market capitalization, as determined by statistics in a filing on Thursday, was $2.875 trillion, or approximately Rs. 2,38,27,300 crore.

After rising 48 percent in the previous year, concerns regarding smartphone demand have caused Apple’s shares to fall 3 percent so far in 2024. After soaring 57% in 2023 due in part to its leadership in generative artificial intelligence through an investment in ChatGPT creator OpenAI, Microsoft has gained roughly 3% year to date.

According to LSEG, Apple’s market capitalization peaked on December 14 at $3.081 trillion, or approximately Rs. 2,55,34,600 crore.

Microsoft’s adoption of OpenAI’s technology throughout its productivity software line contributed to a growth in the company’s cloud computing division during the July–September quarter. Its AI leadership has also made it possible to counter Google’s hegemony in online search.

Apple, on the other hand, has been battling weak demand, particularly for its cash cow, the iPhone. As the economy of China, a significant market, slowly recovers from the COVID-19 pandemic and a resurgent Huawei eats away at its market position, demand in that country has fallen.

On February 2, sales of Apple’s Vision Pro mixed-reality headset will begin in the US. This is the company’s largest product launch since the 2007 release of the iPhone. But according to a forecast released this week by UBS, Vision Pro sales in 2024 would only have a “relatively immaterial” impact on Apple’s earnings per share.

Several times since 2018, Microsoft has momentarily surpassed Apple to become the world’s most valuable corporation. The most recent instance occurred in 2021 when the stock price of the iPhone manufacturer was negatively impacted by worries about supply chain bottlenecks brought on by the COVID-19 epidemic.

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When comparing the prices of these tech stocks to their predicted earnings—a popular metric used to value publicly traded companies—they appear to be rather pricey. LSEG data shows that Apple is trading at a forward PE of 28, significantly higher than its average of 19 over the previous ten years. Microsoft is trading above its 10-year average of 24 times forward earnings, at about 32 times.

Due to the poor demand for iPads and wearables, Apple’s holiday quarter sales estimate for the quarter ended in November fell short of Wall Street’s forecasts in the company’s most recent quarterly report

According to LSEG, analysts expect Apple to report revenue up 0.7 percent to $117.9 billion (about Rs. 9,77,100 crore) for the December quarter. Its first sales growth year over year in four quarters would occur at that point. Results are released by Apple on February 1.

When Microsoft reports in the upcoming weeks, analysts anticipate it will post sales up 16 percent to $61.1 billion (about Rs. 5,06,400 crore), driven by continued expansion in its cloud sector.