Microsoft’s early lead in artificial intelligence positions the software behemoth’s stock market value to decisively surpass Apple’s over the next five years.
Microsoft’s early edge in artificial intelligence has the software behemoth’s stock market value poised to decisively outperform Apple’s over the next five years. 13 institutional investors unanimously agreed ahead of the two titans’ quarterly releases this week.
Microsoft’s (MSFT.O) opens new tab shares have risen 7% so far in 2024, bringing its stock market worth past $3 trillion and dethroning Apple’s (AAPL.O) opens new tab as the most valuable firm. As of Friday, the Redmond, Washington, software company’s market value was a few billion dollars higher than Apple’s.
When asked which would be more valuable five years from now, all 13 financial analysts and portfolio managers polled last week predicted Microsoft to outperform Apple.
Share prices and valuations may alter this week as Microsoft announces quarterly results on Tuesday, followed by Apple on Thursday. In the long run, however, all of the investors stated that Microsoft’s recent breakthroughs in generative AI gave it a tremendous advantage.
Still, some argue that the contest between Apple and Microsoft may become a race for second place, citing Nvidia’s (NVDA.O), whose chips have fuelled the AI revolution. Microsoft made early investments in OpenAI, the maker of ChatGPT, and is integrating generative AI technologies throughout its operations. As Microsoft competes with Amazon (AMZN.O.) and Alphabet (GOOGL.O.) in the booming cloud computing sector, AI is likely to enhance its offerings. Outlook’s apps business now provides users with AI-assisted email composition.
King Lip, chief strategist at Baker Avenue Wealth Management, stated that Microsoft has more levers to pull in the form of Azure cloud, gaming, enterprise software, and, of course, AI, which is the most attractive. “Apple is most reliant on the iPhone, which is a mature market, and the company has yet to detail how it will compete in the AI arms race.”
Apple has been quietly introducing AI into product operations, such as taking better iPhone images, but investors will want to hear more about AI intentions when the firm releases its December quarter results. They will also keep an eye on China, where demand for iPhones has dropped due to a delayed economic recovery from the COVID-19 pandemic and as a resurgent Huawei erodes the Cupertino, California, company’s
Apple will begin selling its Vision Pro mixed-reality headset in the United States on Friday, marking its most expensive bet in over a decade.
Since Steve Jobs debuted the iPhone in 2007, Apple’s stock has increased more than 4,300%, allowing Apple to surpass Exxon Mobil (XOM.N), which became Wall Street’s most valued firm in 2011, making it a cornerstone option for portfolio managers looking to outperform the S&P 500 (.SPX).
With investors concerned about lackluster demand for iPhones in China, Apple’s stock has been steady in 2024, trailing the S&P 500’s roughly 2.5% gain and Microsoft’s 7% jump this year.
Microsoft’s stock also rose 57% in 2023 due to their leadership in generative AI. According to LSEG, the stock is currently selling at 33 times projected earnings, compared to Apple’s future PE of 28 and the S&P 500’s forward PE of roughly 20.
“These are strong, growing firms… but in order to justify these prices, they must continue to grow at an aggressive rate. You’ll need to enhance productivity, and I believe Microsoft is better positioned than Apple to do so,” said Mike Dickson, head of research at Horizon Investments.
According to LSEG data, 50 Wall Street analysts advocate buying Microsoft shares, four are indifferent, and none urge selling.
Apple has 26 favorable analyst recommendations and 12 neutral ratings, while two analysts urge selling, including Barclays, which downgraded to “underweight” this month owing to concerns about “lackluster” iPhone sales.
Nvidia, which is currently the most valuable chipmaker after its stock more than quadrupled last year, may also compete for the world’s most valuable corporation in the coming years, according to Wayne Kaufman, Chief Market Analyst at Phoenix Financial Services in New York.
After reaching historic highs this week, Nvidia’s market value surpassed $1.5 trillion, giving it Wall Street’s fifth most valuable business, trailing Amazon (AMZN.O.) by less than $200 billion.
“I informed our brokers and clients that Nvidia was similar to Microsoft in the early 1990s and Intel in the early 80s.”
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