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Tuesday, January 30, 2024

Microsoft Poised to Overtake Apple as Most Valuable Company

Microsoft’s stock has surged 7% so far in 2024, propelling its market capitalization above $3 trillion. It has now outpaced Apple as the world’s most valuable company.

Investments strategists and portfolio managers unanimously expect Microsoft to remain more valuable than Apple over the next five years due to its early lead in artificial intelligence.

Microsoft Leveraging AI Across Business Lines

Microsoft made key early investments in AI leaders like OpenAI ↗, the developer of ChatGPT. It is now rapidly incorporating generative AI across its offerings. One such integration is Outlook’s AI-powered email composition.

This gives Microsoft an edge as AI transforms cloud computing and enterprise software markets, where it competes with Amazon and Alphabet. Apple has quietly added AI to iPhone features but lacks a clear AI strategy. With iPhone sales slowing, especially in China, Apple’s stock is flat this year.

Its new mixed-reality headset, while innovative, serves a niche market. Unless Apple unveils more ambitious AI plans, Microsoft’s focus and investments in this critical technology appear set to push it ahead of Apple in valuation.

Microsoft’s Azure cloud business, enterprise software, gaming, and new offerings like Outlook’s AI-powered email composition all stand to benefit enormously from artificial intelligence. The company’s early and large investments in OpenAI granted it exclusive access to powerful generative AI models like GPT-3.5.

This enables Microsoft to rapidly integrate AI across its products and services, from Office 365’s automated meeting summaries to Azure’s machine learning offerings. 

As AI transforms major industries, Microsoft’s strategic focus and early mover advantage in AI gives it an edge over rivals.

Meanwhile, Apple has not articulated a vision for AI across its business. While it uses AI to improve iPhone photography and other capabilities, Apple risks falling behind Microsoft and other tech giants in key growth areas if it does not have a more ambitious AI strategy.

Analysts Overwhelmingly Bullish on Microsoft

Among major financial institutions surveyed, analysts unanimously predict Microsoft’s valuation will exceed Apple’s in 5 years. Fifty analysts recommend buying Microsoft stock, while only four are neutral, and none advise selling. 

In contrast, 26 analysts recommend buying Apple while 12 are neutral, and two recommend selling, including a recent downgrade to “underweight,” citing slowing iPhone sales. 

Microsoft’s early lead in AI gives analysts confidence in its ability to drive revenue growth through new capabilities and enterprise cloud market share gains.

Its share price reflects confidence its AI focus will unlock growth opportunities and competitive advantages. With a 33X increase since inception and a valuation of over $3 trillion, Microsoft stocks are expected to grow even more as more investors come in. With AI poised to transform major industries, Microsoft is appealing as a long-term AI investment. 

Its strategic vision, focused investments, and aggressive product rollout allow it to monetize advances in generative AI across the cloud, enterprise software, and other businesses. 

While Apple and Nvidia may compete for the top valuation in the long term, Microsoft’s execution and positioning in AI give it a pole position for now.

James Mackreides
James Mackreides
'Mac' is a short tempered former helicopter pilot , now a writer based in Sofia, Bulgaria. Loves dogs, the outdoors and staying far away from the ocean.

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