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Microsoft has overtaken Apple to become the world's most valuable company: how did this happen?

Do Kwik
17. 1. 2024
3 min read

In recent days, the financial world has been rocked as Microsoft has stepped forward to overtake longtime rival Apple as the world's most valuable company. What's behind this surprising turnaround and how has Microsoft managed to take the lead in the global market?

On January 11, Microsoft opened a new chapter in its history when it once again became the world's most valuable company. This transformation comes afterApple's stockbegan to weaken on fears of falling demand.

Microsoft's journey to the top began last year when its stock experienced a surge thanks to strategic investments in artificial intelligence through a partnership with OpenAI, the creator of ChatGPT. These bold moves have allowed Microsoft to move to the forefront of technological innovation and gain an edge in cloud computing.

Microsoft's stock has pushed the company' s total market valuation to $2.85 trillion. During the Jan. 11 trading session, $MSFT+0.0% stock even rose 2%, bringing the company's short-term value to $2.9 trillion. On the other hand, shares of $AAPL+0.0% closed 0.3% lower on the same day, reducing its market capitalization to $2.8 trillion.

MSFT

Microsoft

MSFT
$410.34 -$1.31 -0.32%
Capital Structure
Market Cap
3.1T
Enterpr. Val.
3.1T
Valuation
P/E
37.5
P/S
13.4
Dividends
Yield
0.7%
Payout
25.1%
AAPL

Apple

AAPL
$182.52 -$1.85 -1.00%
Capital Structure
Market Cap
2.8T
Enterpr. Val.
2.9T
Valuation
P/E
28.7
P/S
7.4
Dividends
Yield
0.5%
Payout
14.9%

"It was inevitable that Microsoft would overtake Apple as Microsoft grows faster and benefits further from the generative AI revolution,"

Gil Luria, software analyst at D.A. Davidson

Microsoft has integrated OpenAI technology into its software ecosystem, which has helped to strengthen its position in cloud computing. Apple, on the other hand, is facing the challenges of declining demand, particularly for the iPhone, in a Chinese market that is recovering from the effects of the pandemic.

In terms of financial analysis, both companies are dearly valued on a stock price to P/E ratio basis. Apple trades at a P/E of 28, well above its average of 19 over the past 10 years. Microsoft trades at a P/E of around 31, which is above its 10-year average of 24. In January, $AAPL+0.0% stock is down while $MSFT+0.0% stock is up.

While Microsoft has earned the post of most valuable company a couple of times since 2018, Apple is now struggling with a low valuation and a limited share of "buy" recommendations from analysts. Wall Street is positive on Microsoft, as evidenced by the rating and nearly 90% "buy" recommendation.

The role at the top of the technology market appears to have flipped, with Microsoft showing its strength and commitment to innovation in the technology world. It is now up to Apple to take up the challenge and find a way to regain its place at the top.

Disclaimer: There is a lot of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.

Source.

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